The Laws of your Money with Ann-Margaret Episode 33

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. The following program is sponsored by New
York Priority Medical Care. Now it's time for the Laws
of Your Money, a weekly call in show with legal

(00:20):
tips to help you protect your money. Here's your host
and Margaret Caroza.

Speaker 2 (00:25):
Hello, and welcome to the Laws of your Money. This
is a program dedicated to protecting you from legal and
financial mayhem. I believe that legal protections should form the
foundation to all of our personal finance activities, because what

(00:49):
does it matter how brilliantly I save and invest if
there's a greater than forty percent chance of losing assets
to a long term illness, an expensive breakup taxes. This
could be capital gains taxes, estate taxes, not to mention

(01:13):
ordinary lawsuits. We know that we're living in a very
litigious society, but do you know that you are statistically
more likely to be involved in a lawsuit with a
former loved one than with a stranger. So we're going

(01:35):
to dive into strategies to protect what you have and
form a better foundation to build more wealth. I am
asset protection attorney and Margaret Carosa. You can visit me
at my Lawyer Ann. There's no E on the an.

(01:58):
At my Lawyer An, the call in number is one
eight hundred three to one zero seven ten. If you're
too shy to call in, or you can't call in
right now, shoot me a question through Instagram at my
Lawyer Ann. I am joined today again by my esteemed

(02:23):
co host, attorney Lorie Miles, who is back with the program.
I think this is your third time. That's right, An,
Thanks for having me, Thank you for being here. I
look forward to our conversation. So all of these topics,
the common thread is when loved ones and finances collide,

(02:50):
we want to prevent explosive results. And these topics are
in the news every day, and I'd like to dive
in with the current economic backdrop. So this show is
decidedly not political, and we don't point fingers or give

(03:17):
a political spin. We simply talk about the facts as
they exist and how we can best navigate and negotiate
the current state of the economic world. So we know
that the One Big, Beautiful Tax Act has done a

(03:44):
lot with respect to outstanding student loans. The number of
repayment options is reduced from seven different forms to two
repayment options, and the former pause on repayments has been lifted,

(04:08):
together with the pause on interest and penalties. There is
greater than one trillion dollars in outstanding student loans, So
this really affects a lot of people out there, and

(04:28):
you know, with fewer options to pause the repayments, people
are going to feel the economic pressure. And we add
to that last week's disappointing jobs numbers. We know that
there are more unemployed people than open jobs in the economy.

(04:56):
You've heard that, that's right, I've definitely heard that, And
I think what's so interesting is you've got this scary
collision right now between a job market that has shifted substantially,
this influx of new AI tools that are taking away

(05:16):
a lot of entry level positions, and then fewer options
for repaying the loans. As kids come out of college
into a devastating job market, how are they going to
navigate a space where they were trained for jobs that
are being taken over by new types of AI and

(05:36):
automated processes for those entry level positions. No, it's definitely
a changing landscape, But I think what those two factors
result in is economic stress and economic pressure. And you know,
when we pivot over into the real life relationship sphere,

(06:02):
whether we're dating or married, the number one cause of
all breakups is financial stress and pressure. So we already
have a divorce rate in excess of forty percent, and

(06:22):
I think if you add economic hardships into the mix,
we can only see that increase. So we have a
high divorce rate, a high unemployment rate, and student loan
borrowers under pressure. When we add up those three things,

(06:45):
what do we have Well, for forty six percent of
parents surveyed by Forbes this year, the answer is adult
children are moved being back home. This is a trend.

(07:05):
We've seen it increase over the course of the past
three decades, but right now it is at an all
time high. So when we have adult children move back home,
that can really disrupt the dynamic in so many ways.

(07:27):
And I think it's very important. You know, I see
a lot of my clients have adult children move back home,
and I would say, you know, based on their complaints,
it's very important to go into this with some ground rules,
because what might start out as a very temporary stay

(07:52):
can easily turn into a very long term stay. So
if we're not clear about responsibilities, you know, speak now
or forever, be stuck doing all of the housework. Right,
So it's almost like you know a college roommate situation

(08:14):
where you want to be clear who is paying for
the utilities, who's paying for the phone, who's paying for
the food. Do your adult children have teenage children coming
into the house, and what are the ground rules with
their guests and overnight guests and weekend visitors. And we

(08:38):
need to revisit our estate planning if we have an
adult child who moves in with us, whether it's because
they're having economic hardships, which is the biggest driver that
I'm seeing, or maybe they are benevolent to and they're

(09:00):
coming to help out mom or dad and be a
little bit of a presence, if not quite a full
time caregiver. But when we have another generation living with us,
we want to revisit the estate plan to protect that

(09:21):
child from potentially being at war with their siblings later. Right,
if my daughter is living with me for you know,
two years, and my will says everything goes three ways
upon my death, the other two kids will want her

(09:42):
out immediately because they want to sell the house and
get their you know, interests in the estate. Right. Yeah,
I think that makes a lot of sense. And I
think the problem with that, though, is how do you
navigate the situation where one of the kids doesn't feel
like that's going to be a permanent situation. You as
the parent may feel like this is going to be

(10:04):
for the long haul, but I don't think a lot
of kids moving home really want to see the reality
of how long that stay might extend. Yeah, and I think,
you know, often this is a great example of we
need to put things in writing to guard against faulty
recollections and differing expectations. Often the elderly parent says to

(10:32):
the adult daughter, don't worry you're going to be able
to stay here after I'm gone. Well, if you don't
put that in writing, the ship has sailed. Now what
do we do if that house is the primary asset
in the estate. You know, it would be lovely if

(10:53):
we could give the house to Susie, if we had
an equal amount of cash to give to the other
two people, that would be easy peasy. But for so
many people the home is the primary asset. So I
encourage people at the very least revisit the estate plan.

(11:15):
You can still say that everything goes to marry Susie
and Johnny. But Susie has the right to continue to
occupy the home until the earlier of her voluntary departure
her death obviously, or x amount of time from my death,

(11:41):
whether that's six months or a year or two years.
If there are high school age children in the house,
maybe we want to pick a time to allow them
to continue in the school that they're going to, So
that could be the end of the academ here. It
can be until they graduate high school or graduate college.

(12:05):
But we want to specify that during Susie's right of occupancy,
she is responsible for the carrying costs, the property taxes,
the insurance, the utilities, on and on and on. You know,
all of this planning is to build kind of dividing

(12:28):
lanes so that the kids are not at each other's
throats later if things are unclear. So it's super easy
do a right of occupancy for X amount of time
for the child who's living there. At the end of
that amount of time, you can give them the right

(12:50):
of first refusal to buy out the other two and
if we're concerned that her credit is shaky. We can
say that she can buy the other two out with
a promissory note over the course of one hundred and
eighty months which is fifteen years, and pick a rate

(13:12):
of interest, and now she would buy out her siblings gradually.
So that's an example of when we need to revisit
some of this planning. Now. We want to also look
to protect the child living with us from being jeopardized

(13:35):
in the event of a nursing home stay. If my
daughter is living with me and I have to go
to a nursing home, they're going to put a lean
on the house unless we do some planning ahead of time.
And under federal law most people know there is a
so called five year lookback period. So want to make

(14:00):
sure that we have a very good trust in place.
We transfer the primary residence into this very good trust,
which will give me one hundred percent of the continued
rights and use and occupancy of the property. But because

(14:23):
it is in this trust, it will be totally invisible
to long term care claims. And we also want to
give all adult children, whether you're living with a parent
or not, everyone needs to be on alert today that

(14:45):
if there is a rehab or a nursing home stay, which,
by the way, all nursing home stays begin as rehab,
so the front door to a nursing home is called rehab,
and we go to rehab following a three day hospitalization.

(15:06):
We know today that the hospitals are looking to get
us out. They say quicker and sicker because they are
paid based on my diagnostic related group code or whatever.
The nomenclature is not the number of days I spend

(15:27):
in the hospital. So we're going into rehab where Medicare
and the Medicare supplement are only covering the first one
hundred days. Beyond this, it's like sixteen thousand dollars per month, right,
you know, people joke, I could be on a fancy

(15:48):
cruise for less money. I could be staying at the
RITZ Carlton for less money. But that's what the rehab costs.
So adult children be on guard when you go into
a rehab with a parent. Some lovely, well intentioned social

(16:09):
worker may give you a bunch of paperwork to fill out,
and you need to be very careful that you are
not unwittingly undertaking a third party obligation to cover the
costs because this happens and your assets can potentially be

(16:33):
on the line. So you're going to be very diplomatic
and say, I'm just a little overwhelmed right now. I'm
going to take all of these things home tonight and
look them over, and you definitely want to get a
second set of eyes on that. So you know, we
need to be on guard with respect to all of

(16:57):
the potential legal lie abilities that are out there. I
want to go back for a moment to the student
loan issue because one of the takeaways from the Big
Beautiful Tax Act is that the lifetime amount of federal

(17:18):
student loans for the first time ever, I think, is
capped at two hundred and fifty six thousand dollars. Now,
I have mixed feelings about that, and you know, I
feel like in my life, I took out a ton

(17:38):
of student loans for undergrad and law school, and I
feel like they were really just throwing money at me.
I had no conception, and as a law student, I
was able to get myself in a whole heap of
trouble and borrow a ton of money. So on the

(18:01):
one hand, I think that this limit is maybe forcing
some responsibility on us. How do you feel about that.
I think that's possible. On the other hand, I hope
it's forcing some of the schools to rethink their total
pricing structure, but who knows. That's a conversation for another day.

(18:23):
I think where the liberal loan granting is concerned, I
had the same exact experience in law school. They were
just giving us money hand over fist and what they
don't do is counsel you with respect to the job
market at the same time, to say, here's what you
can reasonably pay back over the next five, ten, fifteen,

(18:46):
twenty years. And if AI is coming in to change
the entry level position structure at law firms and investment
banking firms, I think that there's a real reckoning that's
going to be happening in terms of what you can
responsibly borrow and what you can responsibly anticipate paying back.

(19:07):
And that becomes a problem, as we've seen for young
home buyers, for people looking to get married, how do
you talk about the level of debt that you have
and your ability to pay it back while trying to
build a financial future someone else? And I think you
know another upshot of a cap on federal loans is

(19:29):
going to be a surge in the private student loan arena. Interesting,
And when we go into the private student loan arena,
oh boy, there is an exorbitant rate of interest. And
there are also going to be requirements that you get

(19:51):
a co signer. So I want everyone with college age relatives, friends, neighbors.
You have to be prepared for your reaction. What do
you do if a nephew, a grandchild, a child wants

(20:12):
you to co sign a private student loan, and you know,
I want people to realize this is a lot more
than just providing some recommendation or reference for this young person.
Even without a default, the entire amount of this indebtedness

(20:38):
that you just co signed is on your credit report. Okay,
So it will immediately lower your debt to asset ratio,
it will lower your your credit score. So at the
very least, if you want to do it, inclined to

(21:01):
do it, you're happy to do it, great, but make
sure that you've done anything related to your credit before
you co sign. If you're thinking about refinancing a mortgage,
now that we hope rates are expected to come down
a little bit after the fed's next meeting, whatever it

(21:25):
is that you want to do a new car, a
new boat. You want to do it before co signing
this student loan. Super important if you really need a boat,
I'm not sure. Well, what do they say about boats?
The two best days of your life the day you
buy the boat and the day you finally get rid

(21:46):
of the boat. That's right. I think we need to
find some friends with boats. Well, I think that's going
to be easier and happier all the way through. Okay,
so if you have a boat out there, we'll bring
the snacks, yes, and maybe a glass of wine. Ohka,
sounds good. Let's talk a little bit. These issues are

(22:06):
in the news and we read that Giorgio Armani sadly
just passed away, and the question is what does this
mean for the company? You know, succession planning is super
important for any of us who have a business, whether

(22:29):
that is a bagel shop, a pizzeria, a dry cleaning business.
The statistics are clear that this small business that you
have sacrificed for decades and poured your blood, sweat and
tears into it will not last the next generation, in

(22:53):
large part because your airs are going to all want
to do different things. So putting a good succession plan
together is critically important, not only to prevent your children
from fighting with each other, but to protect your employees

(23:14):
and your coworkers that their lives shouldn't be uppended when
something happens to you because you didn't get around to
putting a succession plan in place. And we look at
Elon Musk and the Tesla board. I don't know if
you followed this at all. This week, LORI, the Tesla

(23:37):
board trying to get Elon to focus a little bit
more back on Tesla. They put together a proposed compensation
package that could make Elon the world's first trillionaire. I
did hear about this. Yeah, amongst all of the performance

(24:01):
markers that he would have to hit, involves the creation
of a succession plan. So I think this was really
astute on the board's behalf to say this is super
important to the continued functioning of the company, that investors

(24:22):
don't have to worry about what happens. You know, is
this a one man show? And it shouldn't be a
one man show given the size and scope of the company.
So this proposed incentive and pay package is going to
go before Tesla shareholders at their annual meeting on November sixth,

(24:46):
and I hope that Elon is busily coming up with
a succession plan. So Elon, if you're listening and you
need a good succession plan, you can come to Bayside Queen.
It's a charming neighborhood made famous by Archie Bunker, and
we have a railroad stop on Bell Boulevard and I'm

(25:10):
two blocks away. But definitely reach out at my lawyer,
Ann and I can give you a lot more information
Elon on the succession plan. But when we have a
small business, we also want to look at the corporate
governance documents to require succession planning and to require that

(25:35):
all of the stakeholders in the business have relationship agreements. Right,
if you and I are partners, Let's say we open
a boutique together and one of us goes through a
really messy divorce. That messy divorce is going to require

(25:57):
a forensic accounting in the business and operations are going
to be halted while and inventory is done, and it's
really just very damaging to the business, to the employees,
to all stakeholders. So the corporate governance documents should require

(26:22):
all stakeholders to have a prenuptial agreement or a post
nuptial agreement, as the case may be, or a cohabitation agreement,
clearly delineating that business interests are separate, and not only
are they separate, but they don't have to be valued

(26:45):
in the event of a contested divorce. I can't imagine
people having the foresight to think about that when you're
going into business with a friend or a partner. That's
the last thing on your absolute life. But again, we
have a forty three percent chance of it's that's right. Okay,
Let's go back for a moment to the big beautiful

(27:08):
Tax Act. And there's one aspect of it that I
haven't seen in print, and I haven't seen anyone talk
about it, But I think this is the piece of
it that will affect more people than anything else. Do
you know that, starting twenty twenty six, the business deduction

(27:30):
for workplace snacks is being eliminated? Did you know that?
I did not? Do you get snacks at your job?
We have to pay for our snacks, but we get
free coffee? Does that count as a snack? You're losing
your coffee, oh boy, losing the cost? Tragic? Yeah, So
it's impacting a lot of things. Also in the news,

(27:55):
Hulk Hogan died at the age of seventy one, and
a will has been offered for probate in Florida, where
he lived, which lists his son Nick as the sole beneficiary.
He had two children. Reportedly, Hulk Hogan's daughter, Brooke, according

(28:20):
to the articles I've read, said that she voluntarily opted out.
She asked her father, don't name me as a beneficiary
because she didn't want to be caught up in I
guess what she viewed as a drama surrounding Hulk Hogan.
But what's very interesting from this filing in the Florida

(28:46):
Surrogates Court is that the assets are valued at five
million dollars. That involved crypto, it involved a potential medmele suit,
and it involved royalties and business interests. What it did
not include is his real estate portfolio. So what this

(29:10):
says to me is he did have a trust for
the real estate, but forgot to put some of his
other assets into the trust. Okay, not enough to have
a trust. You need to make sure that the trust
covers everything or we're going to have a year long
march through probate court. So with that, our time today

(29:35):
is up. I hope you visit me during the week
at my lawyer Ann and join us next week for
another episode of the Laws of Your Money. Laurie, thank
you so much for being with us, Thanks for having
me in.

Speaker 1 (29:50):
The preceding program was sponsored by New York Priority Medical Care.
The proceeding was a paid podcast. iHeartRadio's hosting of this
podcast constitutione. It's neither an endorsement of the products offered
or the ideas expressed.