As we approach Mother’s Day, the time has come for families to have an open and honest conversation about money. Families are well acquainted with how to vigorously argue their points when it comes to discussion topics like politics, sports, and religion. When it comes to money, however, about the only thing we are willing to discuss and agree on is that we know that those who are wealthy must be the result of being a crook. On the other hand, if someone is poor, we summarily dismiss that situation to stupidity. Now is the time to talk things out with rational people who care about each other as there must be a happy medium. Please see YouTube for the video version:
Over the holidays I have observed a rash of family situations around money. In one case, a son of a client wants to borrow a lot of his mother’s money. While he is interested in Mom’s welfare, he knows his mother is a soft touch for money that will never be repaid. In another case, the husband passed away and the widow finds she can’t talk about money with anyone because everyone at her church knows she has some money and each of them wants to discuss some investment opportunity with her. This client said to me, “You know that my husband and I didn’t agree on everything, but at least we were able to talk through things. Now I can’t talk about my money to anyone other than you.” The most recent situation is the most disturbing.
Case 3: Surprise, surprise, surprise!
Now living in NorCal and the son of a widow client Mom who turns 80 this year and living in the family home in the South Bay, the son was aware that Mom had been on a home improvement project. Before he could look at the work on the house he had to get over the shock of seeing a new car in the driveway. Then his mother asked him to help her to get some bills paid. As he went through the checkbook with Mom, he couldn’t believe that she had put about $450,000 of improvements in to the home. What’s more, he was surprised to see that the quality of the work and that the quality of the appliances didn’t match the cost. Maurice got even more depressed when he discovered that Mom’s first project, the downstairs bathroom shower filled up with water as he was taking a shower. He was glad that he came home as this is a problem that Mom might not ever know that continued to persist. Now Mom has done a very good job of taking care of herself. Her expenses are in order and her pension and Social Security income is over $8,000 per month. But this loving son had to dig deeper.
The Ridiculist: 12 insurance policies
The son was well acquainted with the investments that Mom owned as he was frequently involved in the decisions made with her portfolio. As he poured through various statements, however, he was shocked to find 12 different insurance policies totaling $350,000 of premium that he didn’t know anything about. There are two accidental death policies and three single premium whole life policies. Now I am dually licensed in securities and insurance so I am not an insurance hater. I do believe that all investment vehicles are like tools in your toolbox. To get the job done properly you need the right tools to do the job. In general terms, investments are for living and insurance is for protecting a loss. When it comes to accidental death, it is often the case that when there is an accident and death occurs, the cause of death is pneumonia or complications in surgery so there is no claim. As far as life insurance is concerned, a policy is in order when there are family members who need the income that the deceased used to earn. In Loretta’s case, as a single widow with children in their 50’s who are living on their own, the need for life insurance becomes optional at best. As the son continued taking inventory he discovered there are two different health care policies that may overlap other coverage that Mom is paying for. The son felt there was additional foul play when he dug up three fixed annuities totaling $250,000 sold by the same agent for the same carrier, all with 10 year surrender periods. The most recent unnecessary annuity was purchased late November last year, so he conferred with his mother and they determined that the funds should be returned after they contacted the agent.
Everyone needs an advocate
My intention is to encourage every family to get involved in the family finances. This is especially necessary when it comes to our parents and grandparents. In this case, we just learned that Mom was just diagnosed with mild dementia, so it becomes even more important to have more eyes on Mom’s investment choices. In this case it is clear to this observer that the agent had her own best interests in mind. If it were the case that her son didn’t have the interest, the acumen or the time to help his mother look at her situation to determine what she should own that serves her adequately and appropriately, the results might be hazardous to their wealth.