Saturday, April 28, 2012

Death in America (Part II)

Once a family member passes on a large number of individuals and institutions require notification. In addition, they usually require an official copy of the death certificate and frequently a copy of the Letters Testamentary, a document issued by a court establishing the authority of the executor to manage the estate of the deceased. This is a frustratingly slow process that always seems to require something else before closure is achieved in any step. Here is a partial list of the calls that must be made.

1. The Funeral Home

2. Home Health Care Provider

3. Social Security

4. Life Insurance Companies (you won’t know all of them)

5. Health Insurance Companies

6. Renter’s or Homeowner’s Insurance Companies

7. Employer’s Benefit Office

8. Pension Fund (not the same as the employer in this case)

9. The family attorney

10.All the deceased’s doctors (8 in this case)

11. Apartment or Nursing Home Management

12. Investment Houses

13. Banks (hopefully you will have the safety deposit box key, we didn’t)

14. Credit card Companies (not a pleasant experience)

II Planning for the Funeral

1. Funeral Home (of course)

2. Minister

3. Musicians

4. Family Members

5. Friends (this is dangerous as people can get their feelings hurt if handled poorly)

III Closing Down the Apartment

1. Moving and Storage Companies

2. Apartment Management to Coordinate with Movers

3. Phone Company

4. Newspaper

5. Cable TV Company

6. Medical Rental Equipment Companies

7. Change Address with Post Office

8. The Power Company

Now once we receive the death certificates from the funeral home, still an open item, we can begin the process of official legal notification required to bring the financial issues inside and outside the estate to closure.

From the Book of Common Prayer

MAN, that is born of a woman, hath but a short time to live, and is full of misery. He cometh up, and is cut down, like a flower; he fleeth as it were a shadow, and never continueth in one stay.

In the midst of life we are in death; of whom may we seek for succour, but of thee, O Lord, who for our sins art justly displeased?

Yet, O Lord God most holy, O Lord most mighty, O holy and most merciful Saviour, deliver us not into the bitter pains of eternal death.

Thou knowest, Lord, the secrets of our hearts; shut not thy merciful ears to our prayer; but spare us, Lord most holy, O God most mighty, O holy and merciful Saviour, thou most worthy Judge eternal, suffer us not, at our last hour, for any pains of death, to fall from thee.

I AM the resurrection and the life, saith the Lord: he that believeth in me, though he were dead, yet shall he live: and whosoever liveth and believeth in me, shall never die.

I know that my redeemer liveth, and that he shall stand at the latter day upon the earth: and though this body be destroyed, yet shall I see God: whom I shall see for myself, and mine eyes shall behold, and not as a stranger.

Death in America (Part I)

Maybe it is too close to the actual event, but this is the subject that I am thinking about, so I will share what I am learning. A few weeks ago my mother-in-law passed away. Besides dealing with all the emotions of losing a family member death brings a large number of financial problems and difficult responsibilities to the survivors.

Death in America is expensive. My wife had durable power of attorney for her mother. She paid all her mother’s bills with funds from three joint tenancy accounts. When her mother died, durable power of attorney expired. My wife no longer has access to the brokerage accounts that provided funds for the checking accounts that actually paid her mother’s bills. After her mother’s will clears probate, my wife must be sworn in as executrix of her mother’s will before she will have access to the estate. In the interim, the bills keep coming. At this point we can only pray that there is enough remaining in the joint tenancy accounts to cover her mother’s bills until a separate account for the estate of my mother-in-law can be created to execute the terms of the will. By the way, my mother-in-law’s death will create three tax events. She will have to pay taxes until the day of her death. After her death, her estate will pay taxes until it is dissolved. Finally, we will pay taxes as appropriate on any inheritance.

The family attorney informed us that the joint tenancy accounts were not part of the estate. Legally, they belong to my wife. She is not required by law to pay her mother’s bills with that portion of her mother’s money. Such wickedness would have never occurred to me. However, it is easy to see how something like this could start a family fight.

If you are competent at the time of your death you will probably not have a durable power of attorney agreement giving one of your children access to your funds prior to your death or joint tenancy accounts that will allow one of your children access to the funds required to pay your final expenses. This can be easily handled by setting aside a large sum in a CD that names the executor of your will as sole beneficiary. This money will not be considered a part of the estate requiring probate. You will need to instruct the executor that these funds are designated for payment of your bills. If your executor is dishonest, he can take the money and run. There is no way you can avoid trusting someone with your money once you are gone. Hopefully, you have made a wise decision. Burial life insurance policies can also be used for this purpose but they tend not to be very good investments.

There are a lot of bills. A traditional American funeral with a visitation cost $18,000! I wasn’t surprised since I handled the funeral arrangements for my father-in-law eight years ago. That one cost $16,000. I did not expect prices to go down in the following years. I have instructed my wife not to spend that kind of money on my funeral. It is pretty obvious why cremation is gaining popularity with my generation. A $3,000 funeral, although still too expensive, makes a lot more sense than an $18,000 funeral. My parent’s generation, particularly the women can’t deal with the thought of cremation.

During the final weeks of my mother-in-law’s life my wife was staying in her mother’s apartment located in another city. During that time they made three emergency trips to the hospital. Needless to say, my wife let some things, such as remembering to pay all the bills, slip. The final bill from the home health care agency exceeded $20,000. Patients do not receive one bill from a hospital. They receive bills from the ambulance company, the emergency room, individual doctors, and the hospital. These bills are inevitably wrong. They were not submitted to insurance and Medicare or they were submitted improperly. Fortunately, my wife worked in the hospital system and understands when and what to pay.

Job 1:21

Naked came I out of my mother's womb, and naked shall I return thither: the LORD gave, and the LORD hath taken away; blessed be the name of the LORD.

Sunday, April 22, 2012

Salesmen and the Products They Sell

I have nothing against salesmen except when they are trying to sell me something. Years ago when I worked as a shift superintendent at a saw chain factory, we said successful salesmen had “the gift.” A salesman with the gift could easily earn 3 times a shift superintendent’s salary and for good reason. One good salesman could keep a factory busy all by himself. In a year or less I hope to have a really good real estate salesman working with me to sell my house.

That said remember to always ask the question, “Why is that salesman there?” Some products do not need to be sold. They are bought. Consider term life insurance. Young family men just go to the web, pick out a policy from a company they trust with the features they desire at a price they can afford and they buy it. No salesman required. Products that are good for the company are sold. The better they are for the company the higher the salesman’s commission. Back during the first oil shock of 1973-1974 I knew a man who worked at a local car dealership that sold Hondas and Mercury automobiles. He received a lousy $60 for every high mileage reliable Honda sold but as much as $800 for an unreliable gas guzzling full sized Mercury! Guess where he put most of his efforts. Life insurance salesmen have a saying, “Sell whole life, don’t sleep. Sell term, don’t eat.” Guess that pretty well explains the commission structure of those two products.

If a product needs to be sold, it may not be in your interest to buy that product. Why would an insurance company give an annuity salesman commissions that are typically in the 5% to 5.5% but range up to 14%? If they were all that good of a deal, customers would just buy them on the web, like term life policies.

Salesmen are becoming more sophisticated. They are no longer limited to loud obnoxious bullies wearing plaid polyester suits and white plastic shoes. They are using very sophisticated psychological techniques to get their customers to lower their defenses.

“Marketers must shift their focus entirely from “telling and selling” to “listening and learning.” Customers do not want marketing relationships with your company they want service relationships.”

Hans Peter Brondmo

This quote captures the essence of what is called new paradigm sales, a theory that begins with the notion that every customer has his own values and goals. These are not the same as the salesman’s values and goal but they are every bit as valid and valuable to customer as the salesman’s values are to him/her. These techniques require a marketer to listen to the needs the prospective client. Rather than pitching a product, the salesman as facilitator allows the customer control of the content of the conversation. In this model the sales person controls only the structure of the conversation, allowing the customer the opportunity to discover her own needs through carefully constructed questions that lead the client to a conclusion that makes them believe buying from you is safe. The goal for the new model marketer is not to treat every prospect as a potential sale but to treat every prospect as a potential profitable relationship.

One more thing, Let’s be careful out there!

Saturday, April 21, 2012

The Three Secrets of Money

Recently during a conversation, I had the opportunity to briefly describe what I was trying to do with this blog. I realized I could boil it all down to three points, three secrets that can change your relationship with money.

One, debt is not a blessing it is a curse. In this society debt is just about unavoidable. There was no way I could get buy a house without a mortgage. People without adequate resources face terrible medical emergencies. They are then forced to work out a payment plan with the hospital. At best consider debt a necessary evil, something to be avoided or escaped. Proverbs 22:7 “The rich rules over the poor, and the borrower becomes the lender’s slave.” is the most often quoted verse on this subject but there are many others. In this society people are conditioned to rejoice when they are approved for a loan or another credit card. This is backwards. Pray that the Lord will quickly deliver you from this bondage.

Two, buy things that pay you to own them. Avoid buying things that you must pay to own. In the previous post I demonstrate how buying stock in a major integrated oil company offered some protection from $4.00 a gallon gas. In a recent article I read that due to high cost smart phones, the average cell phone bill in this country is pushing $1,100 a year. This is horrifying, $1,100 in after tax money? What are you doing with that I-Phone? If you are a stock broker using your cell phone to keep up with foreign markets while you are riding in a taxi to the airport, more power to you. If you are using the thing to surf the web, tweet, and check posts on Facebook maybe you can find a better use for some of that money.

Three, James 1:5 states, “If any of you lacks wisdom, he should ask God, who gives generously to all without finding fault, and it will be given to him.” If you have a question about money, ask God. He is no respecter of persons. If you ask he will answer. Be prepared to bring a little shoe leather to that prayer. Study, decisions, and action need to be added to those prayers.

If you can really believe that these three secrets are true, if you can get these precepts down in your heart where they can alter your behavior, they will change your life.

Sunday, April 1, 2012

$4.00 a Gallon Gas!

This morning I saw a teaser headline on Yahoo Finance, Motorists Can Avenge $4.00 Gas by Owning Oil Stocks. It turned out to be a pitch to buy stock in companies with substantial proven reserves. The article contends most of the money is made as soon as the oil comes out of the ground. There isn’t nearly as much profit in refining, delivery, and retail sales. It got me to thinking. One of my happy stories is Chevron Texaco (CVX). Did I avenge $4.00 a gallon gas by owning this stock?

On November 26, 2001 I bought 150 shares of CVX at $84.72 a share with $29.95 in brokerage charges. That totals out at $12,737.95. Today, without adding any money to my original investment, I now own 363.8471 shares of CVX valued at $39,008.05. That would be a profit of $26,270.10. The story is actually a little better than that. The first few years I owned CVX I used the dividends to buy shares in other stocks. Later, when I felt sufficiently diversified, I choose to automatically reinvest my CVX dividends back into more shares of CVX stock.

During that time period both the cars that I have used for my daily commute averaged a little over 28 miles per gallon. They both did better than that on the highway, but let’s stick to the local commute. Let’s propose for the sake of this thought experiment that all the gas I ever bought cost $4.00 a gallon. $26,270.10 divided by $4.00 per gallon works out to 6,567.525 gallons. Multiply that number by 28 miles per gallon and my profit paid to buy gas for 183,890.7 miles. Since I average very close to 15,000 miles a year on my car, owning CVX has paid to buy my gas for a bit over 12 years 3 months, a period of time longer than I have actually owned the stock.

My wife also owns a car. We put about 7,500 miles a year on that car. If we run the same math on a total of 22,500 miles per year on both cars and a more realistic average price of say $3.25 a gallon what happens if we drop the average mpg to 26.5? Her car gets a little under 26 mpg on local driving. In this example, the profits from my CVX stock would have only paid for a little over 9 years and 6 months combined family driving, only about a year and four months less than I have actually owned the stock. Since all three cars get over 30 miles per gallon on the highway, I would guess we came pretty close to breaking even.

Just something to think about.