Blog Archives

Who Do You Trust? by Phil Runyon

8/30/2012

Who Do You Trust?

I'm calling this topic "Who Do You Trust?", because it's about deciding who to trust when you'll need someone else to tend to your business. Yes, I'm talking about when one of the Big D's strikes, and I don't mean daydreaming. I'm referring to Death or Dementia, and your need then for others to give you or your family a helping hand. That might mean serving as the executor of your will, or trustee of your trust, or even taking on your model children for the remainder of their bratwurst years. It might also mean serving as your agent for handling financial affairs or for making those torturous end-of-life decisions.

First, let's dispel a few misconceptions. Your spouse doesn't get to serve in any of these roles just by virtue of that relationship; he/she needs to be appointed in a legal document like anyone else. The exception is that, ready or not, he/she does get the little darlings. Also, there's no legal requirement that any of these roles be filled by a NH resident - that might be more convenient in some respects, but not mandatory. Finally, it's not necessary to choose different people for each role, or to use family members at all. Capable and trusted friends or family members might fill several or all the roles if they're crazy (er, willing) and have the time.

Here are a few guidelines I've found helpful in making the various choices:

Legal and financial agents - they ought to be handling their own affairs in a competent manner in order to take on yours, too; and it would be helpful if they're somewhat nearby (though technology is an amazing thing), in order to have the best access to your mail, banks and professional advisors.

Health care agents - they need to be on the same page with you about issues like Do Not Resuscitate orders and discontinuance of artificial life support; it doesn't matter how smart they are if, when the time comes, they aren't willing or courageous enough to carry out the wishes you've clearly expressed.

Executors and trustees - they not only need to be financially competent, but should be fair-minded and diplomatic enough to command the respect of your beneficiaries; after all, unless you spell out every detail for them (most people don't), they'll have to decide how to divide up the china and silverware, and who gets your collection of fridge magnets. (Don't laugh, that will be major undertaking for my executor.)

Guardians of children - they need to be people who'll raise your kids at least sort of the way you would; that doesn't mean they're the smartest or the most financially savvy or the most diplomatic; it does mean, though, that you admire the job they're doing - or did - with their own kids, that they live somewhere you'd want your kids brought up, that your kids don't totally despise them or their kids, and that they're young enough to keep at it until the chicks can leave the nest.

And it goes without saying (but I will anyhow), they all need to know and approve ahead of time that you're saddling (er, naming) them in these important roles. No one wants kids with suitcases showing up at their door unexpectedly.

Lastly here, you need to revisit your choices at least every 5 years. Some of your choices may have had Big D issues of their own; your financial gurus may have filed under Chapter 7; and your guardians may have moved from the Monadnock Region to a high-rise someplace with a frightening crime rate.

(Posted August 30, 2012)

Be Your Own Mortgage Company by Phil Runyon

8/20/2012

Be Your Own Mortgage Company

How many of us have been to a mortgage loan closing where our eyes glazed over at all the forms we had to sign - and all the fees we had to pay? Many lenders even have a form that says if they've made any mistakes, we'll sign a do-over form. Wouldn't we all like to have a mulligan if we screwed something up? I bet that Olympic hurdler who tripped over the very first one would like to have said, "Why don't we just start this thing over - I wasn't quite ready to go." And the fees are for stuff like a flood insurance certificate, even when everyone knows the property hasn't flooded since the last ice age.

The other half of this rant is about getting approved for the mortgage in the first place. If you haven't been working for the same employer for at least 2 years, you can forget about the lender taking your current income into account, and if your income is irregular because it's based on commissions or other fees for service, you might as well be on food stamps for all the consideration that's going to get you. My apologies to the bankers on this list, but they may have been in the same boat themselves.

Which brings me finally to the point of this. Because our children and grandchildren are having a terrible time getting mortgages these days to buy a house or, heaven forbid, to do something harebrained like starting a business, we should consider being their mortgage companies. What I mean is that if we've got cash languishing in a CD or money market account that's paying nano percent (or is any place else that's doing us no good, like under the Tempur-Pedic), we could loan it to our offspring at, say, 3-5%, and make it a win-win for everyone. The kids wouldn't have to run the loan application gauntlet and pay all the fees, and we could get a better return on our listless funds. Even if our funds are tied up in investments we can't afford to sell, we might consider a low-interest portfolio loan from our brokerage firm, and loan those funds to the kids at a comparable rate.

There are a couple of things to watch out for, though. It really needs to be an arms-length deal, even though you plan to have Thanksgiving together. The loan obligation should be documented in an official promissory note that provides for the interest and the payments, and you should hold a mortgage on the property itself. That's not because you'd foreclose if the kids were late with a payment, but because if they got into financial trouble - someone sued them after a motor vehicle accident or they went bankrupt or got a divorce - you'd have a legal basis for getting your money back before anyone else got theirs.

Of course, we can also make annual exclusion gifts to the kids ($13,000 per person), but if we can't afford to do that, or if we're already doing it and there's a need for more (most houses cost a bit more, even these days), we should consider the private mortgage option. So put on your green eye shade, drive a hard bargain on the interest rate and payment terms if you want, but do like the old TV show and keep it "all in the family." OK, maybe that's a flawed analogy - Archie Bunker would never have made a loan to Meathead!

(Posted August 20, 2012)

Volunteer With Care by Phil Runyon

8/6/2012

Volunteer With Care

Just about everyone who reads this is serving as a volunteer in some capacity for one or more of the not-for-profit organizations that do so much to enrich our communities. And while we're probably careful to protect ourselves against liability in our personal lives, we may tend to let our guards down when it comes to our volunteerism. After all, who would sue us for doing something so altruistic? Can you say lawyers?

Still, we may have a couple of things going for us. If we're on the board, many organizations have directors' and officers' liability coverage to keep us from being held liable for a well-intentioned but bonehead decision. On the other hand, many small NFPs can barely afford to carry out their missions, much less pay for insurance. Make sure to ask before signing on and inquire whether there's any history of liability claims - or any potential claim just getting up to a boil for, say, wrongful termination of a staff member.

But what if we're not on the board, just, say, a volunteer working on a fund-raising event who spills hot coffee on someone; or maybe we're directing traffic in the parking lot and someone gets run over because of our lousy hand signals; or we set up the risers for the concert and they collapse with everyone in mid-Bach? Some consolation is provided by a State statute that exempts volunteers from personal liability in these situations, but only if the organization has kept a record that we were authorized to act on its behalf. Needless to say, that should be in writing and we should have a copy of it in our back pockets before pitching in.

We're still not out of the woods, though, because even if we're eventually exonerated from liability, we may have spent thousands on our own lawyers just to get clear of the mess.

So what is the solution, other than giving up all your good deeds and moving in with Ebenezer Scrooge? My recommendation is that you consider adding an umbrella liability policy to your other insurance coverages. The reason is that many such policies include protection from personal liability for service as an uncompensated volunteer for an NFP. I just checked and mine does (phew!). This coverage is pretty inexpensive, and it includes providing you with a legal defense if you do get tangled up in litigation. After all, you can't really say you won if it costs you $25,000 to get the case dismissed! Even here, though, be very careful, because you'll blow the coverage if you receive compensation of any sort at all - and I mean even free tickets to one of the organization's events or performances. (Reimbursement for expenses actually incurred is OK.)

I hesitated to say all this, because I don't want to scare you off. Just be as smart a volunteer as you are about everything else. Your organizations need you - they really couldn't function without you - and they provide you/me/us with important psychic compensation that won't affect our insurance coverage at all.

(Posted on August 6, 2012)

Runyon Law Office, PLLC