Download A game plan for talking about money with your aging parents

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ANDREW MENACHEM
A game plan for talking about
money with your aging parents
BY ANDREW MENACHEM
Special to the Miami Herald
When you were a child,
you probably put a great
deal of thought into asking
your parents for an increase in your allowance:
What would be the best
day and time to pose your
request? What would be
the most convincing reason? And in two-parent
households, would Mom or
Dad be the "softest touch"?
As an adult, perhaps with
children of your own, it's
time to have another conversation about money
with your parents. But in
many families, you'll need
to plan ahead before raising sensitive financial topics like inheritances, estate
plans, insurance policies,
healthcare costs and other
issues.
Here's a game plan for
talking with your aging
parents about this oftensensitive topic.
A Think about the current financial, health and
personal issues facing your
parent or parents today. Is
there enough money income for a comfortable
RICHARD HODGES KRT
lifestyle? Do they have life
insurance or a long-term
care policy? Do they have a
will or a trust? Is an attorney or family member
authorized to make financial decisions for them
if they lose their mental
acuity? What about their
investment portfolio or
significant personal assets
like a home, jewelry, artwork, boat, recreational
vehicle or other personal
assets?
A Write down all the
questions that you would
like your parents to answer, including the contact
information for an attor-
ney, accountant or financial advisor. If your parents
have a will, for instance,
where is it and who helped
prepare it? If your parents
have bank and investment
accounts, what institutions
manage those funds? Having that detailed information can make it much
easier to sort out a parent's
financial affairs in the
future.
A Consider your own
financial goals. Would an
inheritance from your
parents make it easier for
you to send your children
to college? Would it allow
you to retire earlier in your
career? Or do you feel like
you are making good progress on your own without
necessarily needing those
extra dollars?
A Talk with your siblings,
if any, before you talk with
your parents. One of the
important issues to address
is whether everyone is in
general agreement about
sensitive financial, legal
and caretaking matters.
Try to find a way to defuse
conflicts – particularly in
blended families with different sets of parents –
before they turn into nasty
fights.
A After you’ve done your
homework, the next step is
to set up a meeting with
your parents. This might be
a one-on-one conversation
with you and your Mom or
Dad, or a big family dis-
cussion with all your siblings during the holiday
season. Every family is
different, so the timing and
circumstances will also
vary.
A Give your parents plenty of advance notice. The
last thing you want to do is
to "surprise" them with an
unexpected serious conversation about money.
This also gives them time
to review their own investments, assets and estate plans, so they have this
information readily available. In some cases, preparing for a conversation
will prompt parents to take
action such as drawing up a
will or updating its provisions.
A Be sure that your parents and other family
members understand why
you want to have this conversation: to be sure Mom
and Dade have a wellconsidered financial game
plan for the future. That
involves gathering the
facts, discussing the alternatives and taking action to implement the best
strategy.
A When you sit down to
have the money conversion, try to stay focused on
the factual aspects, rather
than getting swept away by
the emotional undercurrents. Talking about money
can bring up feelings of
envy, guilt, jealousy or
embarrassment in your
TALK WITH YOUR
SIBLINGS, IF ANY,
BEFORE YOU TALK
WITH YOUR
PARENTS.
parents, siblings or yourself. But it's not very productive to argue about
whether "Mom loved you
best" or "Dad never gave
me what I wanted." Instead, try to gather as
much information as possible.
A Don't try to do everything in one sitting. Most
likely, it will take time for
your parents to gather all
the relevant information
and think about their needs
and goals. You and your
siblings may find that your
own perspectives changing,
based on what you learn
from your parents. In any
case, don't rush the process unless a medical
emergency forces you into
making immediate decisions.
A Your parents' financial
advisor, accountant or
attorney can be a great
help when reviewing your
parents' changing lifestyle
and estate plans. Don't
hesitate to get permission
to reach out to these advisors, as you wrestle with
these important financial
issues.
— ANDREW MENACHEM,
CIMA®, IS A WEALTH ADVISER
AT THE MENACHEM GROUP
AT MORGAN STANLEY IN
AVENTURA. VIEWS EXPRESSED
ARE THOSE OF THE AUTHOR,
NOT NECESSARILY MORGAN
STANLEY, AND ARE NOT A
SOLICITATION TO BUY OR
SELL ANY SECURITY. THE
STRATEGIES AND/OR
INVESTMENTS REFERENCED
MAY NOT BE SUITABLE FOR
ALL INVESTORS. FOLLOW
MENACHEM ON TWITTER
@AMENACHEMMS.
SAVINGS BONDS
It’s time to cash savings
bonds bought in 1986
BY SUSAN TOMPOR
Detroit Free Press
As we move into a new
year, our thoughts turn to
diets, ditching bad habits
and seeking inner calm.
But add one more thing
to the financial list of
things that require our
attention in 2016: U.S.
savings bonds.
Thanks to higher interest
rates in 1986, savings bonds
were a huge deal at the time
and maybe almost as hot in
some minds as Wall Street.
Thirty years later, the new
year will mark a milestone
when millions of Series EE
savings bonds bought in
1986 will stop earning any
more interest at various
months in 2016, depending
on when the bond was issued. And those bonds need
to be cashed.
But here’s the trick: No
one is going to send you
any notice on this deal or
automatically redeem
these bonds for you. It’s
totally up to you.
Unfortunately, savings
bonds are one of those
things that many of us
have learned to ignore. But
big money could be hiding
in shoe boxes, safe deposit
boxes and elsewhere
among the savings bonds
that you once found tucked
in birthday cards, bonds
bought through payroll
deduction or inherited
from your parents.
Nearly $12 billion in savings bonds were bought in
1986. Many of those bonds
have yet to be cashed. As of
the end of October, more
than 12.5 million Series EE
savings bonds bearing 1986
issue dates were outstanding, according to the federal
Bureau of the Fiscal Service.
Only a few years had
more sales for savings
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bonds, according to Daniel
Pederson, author of Savings
Bonds: When to Hold, When
to Fold and president of the
Savings Bond Informer.
Other big years: 1992 with
$17.6 billion in bonds sold;
1993 with $13.3 billion and
2005 with $13.1 billion.
Buying savings bonds
was trendy in 1986 because
bonds bought from January
through October 1986 had
an initial rate of 7.5 percent
for the first 10 years. But
the rate was set to fall to 6
percent on newly purchased savings bonds beginning in November 1986.
So people really loaded
up on 7.5 percent bonds in
October 1986.
Pederson said his former
office at the Federal Reserve Bank branch in Detroit received more than
10,000 applications for
savings bonds in the last
four days of October 1986.
Typically, the office would
get about 50 applications
for savings bond purchases
each day at that point.
“Buyers snatched up
billions in bonds during
those final days of October
1986. Most did not realize
that the 7.5 percent was
good for only the first 10
years of the bond’s life,” he
said.
Here are five things to
know about savings bonds:
A What’s the bond really
worth?
The $50 face value on
the bond doesn’t mean it’s
worth $50. Back in 1986,
for example, you paid $25
for a $50 Series EE bond.
So you’ve been building up
interest toward the $50
value and beyond.
How much money you
get when you cash your
bond would vary considerably on the bond and
what interest rates were
paid during the lifetime of
Pub. date: Saturday, December 26
the bond.
Figure out the value with
the Savings Bond calculator at the government
website at www.treasurydirect.gov. You plug in a set
of numbers listed on your
savings bonds and then the
government site will list
how much the bond is
worth now, the next interest payment, when the
bond hits final maturity.
A How much money
could we be talking about?
Plenty – especially if you
have a stack of bonds.
What’s important to
realize is that some people
still haven’t cashed other
savings bonds from early in
the 1980s, either. More
than 7.2 million Series EE
savings bonds issued in
1985, for example, remained outstanding and
not cashed yet, as of Oct.
30, 2015. After 30 years,
these bonds stop earning
more interest.
A $50 Series EE savings
bond with a picture of President George Washington
that was issued in January
1986 was worth $113.06 as
of December. The bond will
earn a few more dollars in
interest at the next payment
in January 2016.
A $500 savings bond
with a picture of Alexander
Hamilton that was issued
in April 1986 was worth
$1,130.60 as of December.
The next interest payment
is in April 2016.
All bonds bought in 1986
are currently earning 4
percent until their final
maturity date. So you do
want to pay attention to
when the next interest payment is made onto the
bonds.
Savings bonds bought
earlier in the year in 1986
paid the 7.5 percent for
first 10 years. The bonds
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Edition: 1st
Starting in January, millions of Series EE bonds bought in 1986 will stop earning interest.
bought in November and
December 1986 paid 6
percent for the first 12
years. After that, they both
earned 4 percent.
The bonds bought in
1986 will be hitting final
maturity and stop earning
interest in various months
depending on the issue
date. If you bought a Series
EE bond in February 1986,
for example, it will receive
its last bit of interest on
Feb. 1, 2016.
Look at the top right
corner of the bond to find
the issue date.
A Where can I cash the
bond?
Often, it’s easier to cash
U.S. savings bonds, especially large amounts at
once, if you’re a customer
at a given bank.
If you have a stack of
400 bonds, as some customers do, you might want
to call a bank in advance to
find a good time to come
into the bank.
Joyce Harris, a spokeswoman for the federal
Bureau of Fiscal Service,
said it can be good idea to
check with the bank first
on any dollar limit that the
bank might have for cashing a stack of bonds at
once. Advice: Don’t sign
the request for payment on
the back of your bond until
you are at the financial
institution and are instructed to sign the bond.
Remember, banks will
have different policies on
how much they will redeem in one visit. Some
banks and credit unions
Section, zone: Business, State
also will not redeem savings bonds at all.
A What kind of taxes will
I owe?
First, you need to figure
out how much of the money you receive can be attributed to interest.
Believe it or not, many
people don’t realize that
they don’t pay taxes on the
entire amount of money
they receive when they
cash a U.S. savings bond,
said George W. Smith IV, a
certified public accountant
and partner at George W.
Smith in Southfield.
What you originally paid
for the savings bond – or the
principal portion – is not
taxable. The interest earned
is taxed at regular income
tax rates, not as a capital
gains income tax rate.
“The interest is not taxable at the state level,”
Smith said.
So if you had a $500
bond issued in April 1986,
it would be worth
$1,130.60 if you cashed it
in December 2015. The
buyer of the bond paid
$250 for it. So in this case,
$880.60 of interest would
be taxable.
What if you cash all the
1986 bonds that hit final
maturity in 2016? Then,
you’d pay taxes on those
bonds on the 2016 tax
return.
It is important to factor
in the interest and save
your paperwork to prepare
your tax returns.
The government’s TreasuryDirect.gov website also
gives some details on who
owes the tax and other tax
questions.
It is possible to report
interest every year as it
builds. But most people
tend to put that off and
report the interest when
they cash the bond. Technically, the savings bond
site notes that even if
you’ve not already cashed
the bond, you would owe
taxes on interest in the
year that the bonds stop
earning interest and
reaches full maturity.
Pederson said the rule is
that you must report interest earned on a bond in
the year it reaches final
maturity or when you cash
it, whichever comes first.
A What’s the interest rate
you’d get if you bought
savings bonds online today?
Nothing close to 4 percent anymore.
Now a Series EE savings
bond issued from November 2015 through April
2016 will earn a fixed rate
of 0.10 percent – so they’re
not all that exciting.
A new Series I savings
bond issued during that
same time would earn a
composite rate of 1.64
percent for the first six
months after the issue date
– and a portion of that is
indexed to inflation every
six months. So the Series I
savings bond has an interest rate that will fluctuate considerably over time.
See www.treasurydirect.gov for information on
how to buy bonds and how
to sell them.
Last change at: 15:24:26 December 25