The Laws of your Money with Ann-Margaret Episode 6

Episode Transcript

Speaker 1 (00:00):
The following is a paid podcast. iHeartRadio's hosting of this
podcast constitutes neither an endorsement of the products offered or
the ideas expressed. Now it's time for the Laws of
Your Money, a weekly call in show with legal tips
to help you protect your money. Here's your host and
Margaret Caroza.

Speaker 2 (00:22):
Hello and welcome to the Laws of your Money. This
is a show dedicated to protecting you from legal and
financial mayhem when it comes to personal finance. I think
the most important thing is protecting yourself legally, because what
does it matter what my rate of return is? If

(00:46):
I have a greater than forty percent chance of losing
assets to a long term illness and expensive divorce taxes,
capital gains taxes, estate taxes, as well as lawsuits. I
believe that we all have some legal landminds in our lives.

(01:08):
Are you concerned about an elderly relative losing their home
to a nursing home. Are you in a second marriage
thinking about the possibility of blended family warfare later? Do
you have a special needs loved one or a relative
who spends money like a drunken sailor and is coming

(01:30):
to you for yet another loan I am asset protection
attorney and Margaret Carosa joined today again by my good
friend Paul Sladkus. Welcome back to the program.

Speaker 3 (01:43):
Paul, Hello Anne, Nice to see you you too.

Speaker 4 (01:47):
Okay.

Speaker 2 (01:47):
I welcome everyone to join our conversation. If you have
some advice, if you have a legal and or financial question,
the call in number is eight hundred three to one
zero seven ten.

Speaker 4 (02:06):
Okay.

Speaker 2 (02:06):
So we know, Paul, that we are living in a
very litigious society. And I don't know, do you happen
to read the New York.

Speaker 4 (02:15):
Post or no?

Speaker 3 (02:17):
Every once in a while.

Speaker 2 (02:18):
Okay, Friday, the front page was all about lawsuits and
it had a full two page spread on bogus lawsuits
that are costing New York state businesses eighty eight billion

(02:39):
dollars per year. These are staged accidents and their you know,
phony blooney slip and falls. New York has probably the
most friendly environment to tryal lawyers in the United States.

(02:59):
And you know, one example of that is New York
State scaffolding law. When there is construction going on and
there's scaffolding put up. If someone if a worker hurts
themselves on the scaffolding, the construction company is on the

(03:20):
hook legally, even if that employee had a few beers
at lunch and you know, came back a few sheets
to the wind and fell off the scaffolding. So and
there's also a bill that passed both houses of the
state legislature and it's sitting on Governor Hokeel's desk that

(03:43):
would further expand notions of liability. So we'll see whether
or not she vetos this legislation again. But in the meantime,
we know that we have to be very careful because
people are really it's a gotcha society on so many levels,

(04:06):
but especially from a litigation perspective.

Speaker 3 (04:11):
I don't even want to walk under all those scaffolders
New York. It's like, walk on this side, look on
that side.

Speaker 2 (04:17):
It's very scary, you know, But it's sort of ironic.
And I've shared the story with you before, Paul, that
my grandmother was actually a trip and fall queen. She
would she sued more than one catering establishment at family
weddings when she would have a few drinks and get

(04:40):
out on the dance floor. Her favorite dance was a
Charo impersonation. Do you remember Charo's.

Speaker 3 (04:49):
How could You forget. If you knew Charo, you would
never forget Charo.

Speaker 2 (04:53):
She would do an imitation of the Hucci Couci dance,
and more often than not, this would end in a fall.
And then the catering establishment was sued. And you know,
I was a child at the time, and I vaguely remember.

Speaker 4 (05:10):
All of these lawsuits. And you know, maybe I.

Speaker 2 (05:13):
Feel a little bit guilty because I know that my
braces were paid in part by one of these settlements.

Speaker 4 (05:23):
So my teeth are nice and straight.

Speaker 3 (05:24):
Right, That's why you're a lawyer now to do the
right thing.

Speaker 2 (05:27):
I'm trying to, you know, write the scales here. So
you know, we want to protect ourselves legally. And when
we think about legal structures to protect our assets, we
have several different choices. We can have an LLC, we

(05:48):
can have an LLP, a limited liability partnership. We can
have a corporation, a C corporation, an S corporation, or
my go to structure, which is is what, Paul, what
do I like to protect the assets?

Speaker 3 (06:03):
Well? Trust, a trust. I've learned something.

Speaker 2 (06:09):
We want to think about having a trust to protect
our assets. So what about insurance? This is a question
I get a lot people say, well, I don't need
a legal structure to protect my assets because I have insurance. Well,
insurance companies are amongst the most profitable companies in the

(06:34):
United States because they have a lot of very smart
lawyers who do these contracts, and I don't think any
of us fully read the insurance contracts, and they have
a ton of ways that they can get out of
paying claims. So one very common example, and we talked

(06:58):
about this in a prior episode, in the context of
the importance of avoiding probate. We want to avoid a
year long delay before we can sell our deceased mother's
home because the home is vacant during the probate process,
and if we fail to notify the insurance carrier that

(07:23):
the home is vacant, they would be within their rights
to reject a claim because one of the requirements of
homeowners insurance policies is that we notify them if there
is a change in use. So a lot of people
try to save a few dollars and they say, Okay,

(07:44):
we're not going to let the insurance company know that
the home is now vacant, because what's going to happen
to the premiums when the home is vacant, they raise them. Yeah,
they're going to skyrocket. But if you're not going to
tell them that the home is you might as well
just pull the entire policy because there's no middle ground here.

(08:06):
You are effectively uninsured. And the same goes for folks
who rent out a property. So one of the traditional
wealth building vehicles for young people starting out is to
put together a down payment and buy a two family

(08:28):
or three family home and they live there initially, and
then when they put together enough money for a down
payment on a second property, they buy another home, and
then they rent out the two family totally.

Speaker 4 (08:44):
If they do.

Speaker 2 (08:45):
Not notify the insurance company of that change in use
and it's no longer owner occupied, they're in for a
root awakening if there is a claim made or damages.
So we really need to inform the insurance company. If

(09:05):
we have a vacation rental, you need to notify the
insurance company that you're renting this place out on vrbo
or Airbnb, and you also need to be very careful
that you are observing the municipality or county's rental law.

(09:29):
A lot of very popular rental destinations on the East
end of Long Island.

Speaker 4 (09:35):
The North Fork, the South Fork.

Speaker 2 (09:37):
They have minimum four week rental periods. And if I'm
trying to skirt my municipality's rental zoning ordinances and I'm
doing weekends, they're on Airbnb and vrbo and someone hurts themselves.

(09:58):
Now I was operating an illegal rental and the insurance
company doesn't have to pay. I'm going to put you
on the spot and ask you, honestly, have you ever
employed someone in your home, in your household and paid
them cash off the books? You can define to answer.

(10:19):
I mean, I will be honest. I've done it.

Speaker 3 (10:22):
I made him lunch.

Speaker 2 (10:26):
You know, you go to the supermarket and you see
these ads. And I took this guy's number a few
years ago. He was a gutter cleaner and super nice guy.
I became very friendly with him, and it was kind
of don't ask, don't tell.

Speaker 4 (10:43):
I doubted that he carried, you know, a.

Speaker 2 (10:46):
Liability insurance and workers comp and I would pay him
he would clean the gutters. And one day I get
a call from this guy.

Speaker 4 (10:57):
Again. We were friendly, and I said, hey, what's up?

Speaker 2 (11:01):
And he wanted my legal advice because he wanted to
sue a client because he had a little fall on
their roof, and I thought, oh, dear, you know this guy, Yeah,
exactly who's next? Well I decided I was not going
to be next, and you know, never invited him back

(11:23):
to the house to clean the gutters. But it was
definitely a wake up call.

Speaker 4 (11:27):
We need to.

Speaker 2 (11:28):
Think in terms of people wanting to sue us and
create legal structures, especially for the real estate. You know,
I mentioned briefly structure types, the LLC, the LLP, the
two types of corporations.

Speaker 4 (11:48):
Those asset class.

Speaker 2 (11:51):
Structures will protect from liability, but will not in and
of themselves avoid probate. More Over, those structures do not
protect the assets from long term care. So we really
need to sit out and put together a comprehensive plan.

Speaker 3 (12:12):
You know, I got a little bit similar. Someone asked
me a question to ask you. I am my father's executor.
The will says everything is split three ways. He loaned
my brother one hundred thousand dollars which was never paid back.
Can I deduct this amount from his share?

Speaker 2 (12:33):
This is a very very common question, so you know,
before getting into the answer there, this really highlights the
importance of taking a step back and imagining what the
future possible fault lines could be upon our death. It's

(12:54):
very common to loan a child money, and it's just
as common that the child has things in life that
come up and you know, they really were honest when
they had every intention of paying us back, and then
you know, the kids had to go to college and

(13:15):
this happened, and that happened, and they just never got
around to paying it back. Well, it is incumbent upon
the parent to deal with that in the estate plan.
Because if my will says everything three ways, and I
loaned a child money ten years prior, was that loan.

Speaker 4 (13:38):
To be forgiven upon my death? Who knows? Right?

Speaker 2 (13:43):
If the parent is silent, So I encourage everyone to
make that crystal clear because if there's not evidence that
there was alone, then it's presumed that it was a
gift during life and they're going to split the remainder

(14:04):
of the estate.

Speaker 3 (14:05):
So should should a parent actually write something down so
they have a red in even due respect of the
other children?

Speaker 2 (14:13):
Yeah, not a bad idea to write up a promissory note.
You can think of it like an IOU. You can
download this off the internet and you can plug in
a rate of return and you can say it's payable
upon demand. But if I am giving my daughter one

(14:34):
hundred thousand or loaning her one hundred thousand toward a
down payment, I am concerned if her marriage doesn't work out,
that this guy is going to get half of the
money that he says I gave to her. So it
would be really lovely if upon divorce I can pull

(14:57):
from my sock drawer this iou to show that that
one hundred thousand is not part of their assets subject
to marital dissolution.

Speaker 3 (15:08):
And she has it also, and she has a copy
of it also in your records.

Speaker 4 (15:12):
Exactly, super super important.

Speaker 2 (15:15):
But let's say I do want to reflect that he
already got that one hundred thousand. So the most common
mistake out there when we're dealing with money that was
loaned to a child during life. Let's make the math easier.

(15:36):
Let's say you're my son, Paul. I have two other sons.
I loaned you ninety thousand, So how should we deal
with that within the will?

Speaker 3 (15:49):
Well, I think, and I would want to do that
for two other siblings. Is that I owe you ninety
I own the group dollars, and upon death that should
be taken out. Okay, of mine.

Speaker 2 (16:06):
That is not how it should go. You know, it's
a little bit counterintuitive. But let's say I loaned you
the ninety thousand, if you had paid me back, right,
my estate is ninety thousand more, and when I split
that estate three ways, you got thirty of that ninety back.

Speaker 1 (16:30):
Right.

Speaker 2 (16:31):
So the way to do it is to leave your
share alone and to say, out of the starting gate,
your two brothers get ninety thousand dollars a piece, and
then the rest, if there is anything else, is split
three ways. So that's a really good way to do it.

(16:52):
So that's an example of when we need to update
the estate plan if they're there is some you know,
intra family loan or gift, I need to update the documents,
which leads to the importance of retaining a set of

(17:14):
handcuff keys when you do all of this planning. So
it is never ever a good idea to do a
totally irrevocable trust, never a reason to do that, because
if I do a totally irrevocable trust, I am stuck

(17:34):
with you as my trustee. If we have a falling out,
I did not retain the ability to make changes. So
it's really important no matter what you do to protect assets,
that you have the ability to react to life curveballs

(17:55):
in time to come, and that you're able to make changes.
When do we want to make changes upon the death
of a beneficiary? Not necessarily right, because I'll say I
give everything to my spouse, and if my spouse predeceased me,
then I give it to Mary, Susie and Johnny. So

(18:17):
death in and of itself is not a reason for
me to need to update these documents.

Speaker 4 (18:24):
Before we go further.

Speaker 2 (18:25):
If you want to join the conversation, the call in
number is eight hundred three two one zero seven ten.
Do I need to update the documents if someone's name changed,
If my daughter got divorced and remarried, The answer is no,
if that was her legal name on the date that

(18:48):
I set up the documents. We do, however, want to
update our trust. We want to update the will if
a beneficiary as a serious illness. Let's say that my
spouse doesn't die, but he had the bad luck to

(19:08):
have a stroke Parkinson's dementia related illness, and it seems
more likely than not that he will require long term care,
which in our neck of the woods costs sixteen thousand
dollars per month and Medicare and the supplement only cover

(19:29):
the first hundred days of that. So I want to
not necessarily disinherit my spouse by going over his head
and leaving everything to the kids. But I want to
update the documents to say the following. If I am
survived by my spouse, I leave everything to the family trust,

(19:54):
which up until this point only held the house and
investment real estate. But I leave everything to that family
trust for my spouse's lifetime benefit. This way, the trustee
has access to the assets to help my spouse without

(20:14):
subjecting them to his long term care claims.

Speaker 3 (20:19):
That's big.

Speaker 2 (20:20):
Yeah, Okay, So we are now exactly in mid December,
and do you know more people get engaged in the
month of December than any other month.

Speaker 3 (20:35):
I didn't know that.

Speaker 4 (20:36):
Yeah.

Speaker 2 (20:36):
So very romantic and lovely. And if you're listening to
this and you have a ring in your pocket and
you're getting ready to take the plunge, I recommend that
you consider updating some legal planning because in the time

(20:57):
period between your decision to throw your lot in life
together with this person and the actual marriage, you are
in legal limbo. So I could have a very committed,

(21:18):
maybe a lifelong partner, and we decide, for whatever reason,
that we don't want to get married. It's important that
I update my advance directives because do I want someone
other than my partner making life and death decisions for
me in a hospital setting. So for most of us,

(21:40):
the answer is no. And if you're not legally married,
your significant other is going to have to jump through
hoops and perhaps do legal battle with those people that
are technically your next of kin in order to make

(22:01):
life and death decisions in a hospital. So the good
news here is you don't need a lawyer to do
a healthcare proxy.

Speaker 4 (22:10):
I've told you before.

Speaker 2 (22:12):
Go onto my website, download the healthcare proxy, fill it.

Speaker 4 (22:16):
Out, very little room for error.

Speaker 2 (22:19):
The website is my Asset Protection Attorney dot com. Okay,
we want to do a healthcare proxy. We want to
do a living will. We want to do a power
of attorney naming our partner to be able to handle
business transactions for us in the event that we're incapacitated.

(22:42):
And if we're living in a property that is owned
solely by one, that person needs to do a little
bit of a state planning to make sure that the
other one has a roof over their head for a
certain period of time. Because if my fiancee dies without

(23:05):
a will and I'm living in the apartment that he owns,
I'm going to be homeless potentially because New York state
law says, when you don't have a will, we have a.

Speaker 4 (23:17):
Formula for you.

Speaker 2 (23:19):
And that formula is not going to include Anne in
that example. So when there's a change in our relationship,
we really need to think about updating the documents. Okay,
so the month of December we see the most engagements

(23:39):
of any other month in the calendar year.

Speaker 4 (23:42):
And you know what we see in January, Paul.

Speaker 3 (23:46):
Is it like health clubs? Nobody end up going, No,
we go for a couple weeks with divorce divorce.

Speaker 2 (23:53):
There are more divorce actions filed in the month of
January than any other month in the calendar year. And
I can't help but think that is in part because
of the financial pressures.

Speaker 4 (24:11):
Of the holiday season.

Speaker 3 (24:13):
Yeah.

Speaker 2 (24:14):
Well, we talked a little bit about this last time.
You know, it really saddens me when people feel pressured
to buy loved ones extravagant gifts and you know, putting
purchases on credit cards with interest rates of over twenty
nine percent. You know, if someone cares about me, they

(24:38):
don't want me to put myself in financial harm right
to get them a gift.

Speaker 3 (24:44):
You know. We talked about that last week. Yeah, and
it made me actually think about a couple of things.
I'll share it quickly. Captain Kangaroo show. I was on
the production manager on the Showlly at the end of
Captain kang at CBS. At the end of the show,
Captain Kangaroo would always say, spend time with your family.

(25:05):
And as far as one of the most important things
I believe is time with your loved ones is worth
a gigantic, beautiful new car. That is the most important
kind of thing. So I think spending time with a
loved one. Another thought is, you know sometimes people don't

(25:25):
have the ability to pay for a root canal. Yeah,
this money is towards the root canal as opposed to
a cashmere sweater.

Speaker 2 (25:33):
Okay, you know, not terribly romantic, but very very very practical.

Speaker 4 (25:39):
So let me ask you a question.

Speaker 2 (25:41):
You know, you are a savvy New Yorker and you
live I'm not going to give out your address, but
you live in a very fancy place on the Upper
West Side and I'm sure you have occasion to go
to fancy restaurants and when the waiter tells you about

(26:04):
some sublime sounding special, do you ask how much is that?
Or are you you know, a little reluctant to do that.

Speaker 3 (26:16):
No, I'd say, I'm not the typical in New Yorker.
I'm not a real savvy I ask. I hardly go
to those restaurants. I love eating at home. I bought
when it was a bad area in eighty five on
the Upper West Side, and I live a very plain,
plain kind of a life. Everybody around me, I see,

(26:37):
they go. Every restaurant's packed.

Speaker 4 (26:39):
Every restaurant is packed.

Speaker 3 (26:41):
And I cost a lot of money.

Speaker 2 (26:42):
I think a lot of spending takes place when we're
too shy or we feel stupid to speak up, and
in the restaurant context. I remember when my older son, Billy,
who you've met, he was about ten, and we went

(27:03):
out for his dinner and it was, you know, a
splurgy kind of dinner, right, we don't go out that often.

Speaker 4 (27:10):
And there was a special.

Speaker 2 (27:12):
It was a lobster tail, and he said I'd like
the lobster tail, and yeah, we said, okay, he could
get the lobster tail. And now, in my mind, cheapskate
that I am, I'm thinking, oh, dear, this is going
to be expensive, and I'm imagining, you know, the lobster
tail is going to be like, oh, maybe thirty eight dollars,

(27:34):
and I thought, okay, you know, I'll live with it.
The bill came and the lobster tail was over eighty
dollars and it was just bananas. And since that time,
when the waiter tells me about some you know, sublime
sounding special, I smile and nod my head and ask,

(27:59):
matter factly, oh, and how much is that? You know,
you can't be afraid to do that, and you can't
be you know, pressured or guilted into spending more money
than you should.

Speaker 3 (28:15):
A lot of survival techniques. In New York City, New York,
you can probably buy almost anything less expensively than you
can buy it anywhere else. Because of quantity. You can
get food very reasonably, I have found. And I think
one good secret is become a senior very quickly, because
seniors have great.

Speaker 2 (28:35):
Options, and not be afraid to mention that you're a senior.
You know, some people are too vain to say that
they're a senior. So I thank you Paul for being
back and sharing your tips, and I encourage all of
you to reach out to me during the week. You

(28:55):
can email me through the website my Asset Protection Attorney
dot com and you can follow me on Instagram at
my Lawyer Ann and I hope you all join us
next week ten thirty am on sevent ten woor the
Laws of your Money. Thanks for joining us, Have a

(29:17):
great day, folks.

Speaker 1 (29:43):
The proceeding was a paid podcast. iHeartRadio's hosting of this
podcast constitutes neither an endorsement of the products offered or
the ideas expressed.