You’re dead. Who’ll take care of the pet?


DSC_1106For many, the dog or cat are members of the family. As such, consider what might happen if you die, particularly if pets are still relatively young.

A pet trust is a relatively simple tool to make sure that your pet receives the care it needs in a lifestyle to which it has become accustomed. The pet trust operates just kike any trust:  you, the Settlor, creates the trust; you name one or more people, the Trustee(s), to follow your directives with regards to the money, and in the pet trust agreement, consider:

  • the person or facility to house and care for the pet
  • Specific care instructions
  • Ways in which trust funds are to be used for the pet’s benefit
  • Medical care directives for the animal

The Trustee handles the money for the benefit of the pet and the pet is under the care and supervision of someone other than the Trustee.

The pet trust should include alternate plans in the event the named caretakers are unavailable or unwilling to house the animal when the time comes.  Also, the pet trust should consider what happens if the pet predeceases the owner, and should include alternative directives for the placement of the pet trust funds.


IRS Offer in Compromise Pre-Qualifier

Hear all the ads on the radio?  “Call us if you owe the IRS lots of money!”  Here’s what a professional will do if you owe the IRS lots of money, in this order:  1) determine if the IRS claim is correct and if it is then; 2) see if an Offer in Compromise may work, and if it doesn’t then: 3) try to enter into an installment arrangement.

Offer in Compromise prequalifier is here.



Why annuities are evil, except when they’re not

It’s one of the most common questions of a financial adviser:  should I buy an annuity?

First though, what’s an annuity?  It’s quite simple.  An annuity is a contract in which I give you money and you promise to pay it back in a number of payments.  Next, it gets complicated.

Immediate vs. deferred

Your annuity may start paying you immediately or it may begin to pay at some defined point in the future. A deferred annuities usually costs less because the insurance company is holding your money for a while.


Fixed vs. variable

Fixed annuities pay fixed interest rates or fixed payouts, and the income they generate is very predictable.  Fees associated with fixed annuities are, or should be, quite small.

Variable annuities tie the annuity’s payout to the performance of some type of securities.  That is, you give you money to an insurance company.  The insurance company pays it back to you based on how, say, the S&P 500 or DOW…performs.

Lifetime vs. fixed period

You have a choice how long to receive the payback:  over the rest of your life, over the rest of you and your spouse’s life. Alternatively the annuity may pay you for a fixed certain period, say 10 or 20 years, guaranteeing that even if you die younger than expected, the heirs will collect the remaining payments.   It would be a shame to invest in a lifetime annuity, only to die young.

Single premium vs. multiple premiums
A single premium annuity requires one deposit with the insurance company. Alternatively, you can buy an annuity over time with multiple payments.

The good
Here are some of the advantages of annuities:

  • Fixed, safe monthly income.
  • No limitations, unlike 401(k) and IRA.
  • Simple. Annuity income can be preferable to income generated through a stock portfolio where you have to make decisions regarding when and what you should buy and sell.  With an annuity, you simply cash the check.
  • The income earned by the investment is only taxed when you receive the annuity payment.  Remember however that money in a 401(k) or IRA is already tax deferred, so there’s no tax benefit of placing pre-tax IRA money into a annuity contract.

The bad

  • Your investment is locked up.  Unlike a bank account, once you make that deal with the insurance company, there’s a penalty for undoing the deal early.
  • Big commissions.
  • High fees.  A mutual fund can be had for less than 1% per year.  A variable annuity will cost you 2% to 3% per year.  Only a couple of percentage points you say?  Those couple of points over 10 years on $100,000 will cost you $10,000 to $20,000.
  • With variable annuities, you often get to choose how your money is invested. But remember that what you’re doing is a lot like selecting mutual funds, and you could always pay far less to invest directly in funds, cutting out the annuity middlemen.
  • The Income Riders! Income Riders aren’t cheap.  The payout is the most important aspect of the Income Rider and and here are the common deceptions associated with the payout:  (a) you can’t just take the lump sum money that’s accumulated from the income rider; you have to take the lifetime payout on that accumulated money; (b) the lifetime payout is based (duh) on your lifetime.  The older you are the higher the monthly payment, but, the shorter your life, and (c) the annuities that “lock-in” the daily value and give you the highest value as a lifetime payout are designed to withstand a severe market drop, which would in theory leave you with a unexpectedly low investment, but protected by the Income Rider.  Fact is, that the severe market drops have historically been infrequent and recover rather quickly, such that the Income Rider results in a payout approximately equal to the underlying investment:  you’ve paid for an Income Rider with no value.




After months of posts, gbridgman.com was hacked.  That, even with a password with caps, punctuation, numbers and other sundry talisman.  Probably it was by the guys who provide the domain, economically ticked off that I didn’t buy the site protection.

So, November 27, 2015, we’ll begin again.