529 College Savings Plan Follow Up

Yesterday I posted an update on 529 college savings plans, noting that the IRS will allow investors to make two investment changes for 2009.  Coincidentally, The Columbus Dispatch ran an article today, stating that the Ohio Tuition Trust Authority has expanded investment options by adding six new funds designed to give investors more diversity of funds and to reduce investment fees.

Do You Have a 529 College Savings Plan?

This year there is a slight but significant change to the investment rules for 529 college savings plans.  Previously an investor could only change investments once a year.  This created some issues in 2008 when the market sank and investors had already made an investment change for the year.  The IRS will allow investors to make 2 investment changes for 2009.

Quotable II

The current market environment is a “series of earthquakes with constantly changing epicenters.”  - Deutsche Bank Chairman Josef Ackermann in a recent Wall Street Journal article.  Comparing the economy to natural disasters does wonders for investors’ confidence.

Quotable

“This is the best prospecting list ever. You’ve got the names and addresses of a whole bunch of rich people who don’t demand much accountability.”  - Ken Phillips, RCG Capital Advisors, quoted in the Wall Street Journal article, Madoff Clients Exposed.  Such a comment is probably why some investors were upset with the release of the list.

Lost Money, Now Found

Do you ever check the Department of Commerce’s Division of Unclaimed Funds to see if it is holding your money or your clients’ money?  According to its website, the division has more than 3,200,000 accounts worth over $1,000,000,000 in its custody.  It takes less than five minutes to search for any unclaimed funds.

Want to impress your clients?  Have your secretary check the names of your clients.  Your client would love to receive a letter stating you uncovered an unclaimed fund.

If you reside outside of Ohio, you can locate your state’s website by checking www.naupa.org.  Happy hunting.

The Elderly May be Targeted by Some Ponzi Schemes

The term “Ponzi Scheme” derives from a financial fraud perpetrated by con man  Charles Ponzi, where he promised investors very high returns in a relatively short period of time.  The initial investors are actually paid their returns from subsequent investment victims.  Because these schemes entice the investor with tempting and remarkable profits, they usually involve a proposition that is difficult to understand or vague in its description.

 A Wall Street Journal article reports that the number of alleged Ponzi Schemes has mushroomed since the Bernie Madoff scandal.  The reason for the proliferation is that financially-strapped investors are trying to access their assets.  Also, the inevitable failure of this type of pyramid scheme is accelerated when new investors are difficult to lure.  The poor economy is like fuel to the fire.

 A troubling detail of the article is that many of the victims are the elderly.  People who will likely need access to their nest egg in the near future and will not be able to work to try to rebuild any wealth.  In the meantime, the predators typically enjoy a lavish lifestyle.

If you personally are approached by someone offering incredible returns with little or no risk, recall the old saying “if it sounds too good to be true, it probably is.”

Columbus Bar Association News Bytes

The Columbus Bar Association (CBA), as a benefit to its members, publishes Columbus Bar News Bytes. The CBA recently asked me to share my experience (albeit limited) with websites, blogs, and social networks.  The first of a two part article appears here. Feel free to let me know your comments. 

Sibling Rivalry

Our firm often defends will contests.  You have probably heard of the scenario.  Mom or dad treats one child better than another.  The other child, not surprisingly is hurt, and contests the validity of the will.  The complaint may contain a claim that the one child unduly influenced the parent to make the purportedly unfair will.  We wrote an article on the topic in 2006.  Occasionally, the lawsuit is accompanied by another complaint for intentional interference with an expectancy to inherit.  These scenarios often make people wonder, “what would mom think if she new this fight was going on over her will?”  Well, in at least one case, we are no longer left wondering.  The American Bar Association recently reported on a case where a son is contesting the validity of his mother’s will, and she is still alive.  Mom feels the lawsuit is “ridiculous and unnecessary and inexcusable.”  If you are wondering whether mom is near death, she was quoted as saying, “I'm not dead yet, and I don't plan on croaking soon.”

Dr. Martin Luther King, Jr.

On Monday, I will be attending a breakfast celebration in honor of Dr. Martin Luther King, Jr. at the Greater Columbus Convention Center.  The keynote speaker is Dr. J. Alfred Smith, Jr.  My ticket to the event proclaims that it is the "largest U.S. event commemorating Dr. King".

Quote of the Month…So Far

“It was like riding a tiger, not knowing how to get off without being eaten.”  - B. Ramalinga Raju, founder and chairman of Satyam Computer Services Ltd. in his letter of resignation.  Mr. Raju, who received a master’s in business administration from Ohio University, admitted concocting false financial data for his company, including a non-existent cash balance of more than $1 billion (yes, that’s billion with a “b”).

That’s What Friends Are For

According to an article in The Wall Street Journal, Bernard Madoff received a whopping $250 million, ten days before his arrest, from an old buddy, Carl Shapiro.  While a very nice gesture, it was insufficient to keep Mr. Madoff’s business afloat.  Mr. Shapiro lost an estimated $400 million as a result of the Madoff fraud.  No word on whether they are still pals.

No Surprise – Obama Planning to Block Repeal of Estate Tax

The federal estate tax picture is becoming clearer.  According to The Wall Street Journal, President-elect Barack Obama and congressional leaders are prepared to move quickly to freeze the exemption amount and tax rate at 2009 levels.  The Obama plan would mean that estates less than $3.5 million would be exempt from the federal estate tax.  It would also mean that the maximum tax rate would remain at 45%.

What's a Contingent Trust?

A contingent trust is a written agreement directing how a person's estate should be managed and distributed in the event of a certain occurrence. In most cases, a contingent trust is used to address the possibility that your spouse does not survive you and you have young children. You may shudder to think how your young children might use their inheritance. There are plenty of examples of a child inheriting property and quickly expending it on fast cars and a fast lifestyle. Also, if your child is a minor, it is likely that his inheritance would require a guardianship. This means that the Court would decide who to appoint as guardian and the whole matter would be public record. The guardianship would terminate at the age of majority (18 years) and the money released to the child. The contingent trust is used to not only select a trustee of your choosing, but to instruct when your children should receive their inheritance. Frequently, the trust provides for distributions at different ages. For example, you may decide to distribute 25% of the trust at age 30, 25% at age 35, and the remainder at age 40. The trustee would have discretion to distribute or expend money on your child's behalf.