White House Proposes New Rules to Protect Investors Saving for Retirement

You might think that the top priority of the broker or financial adviser managing your retirement funds is to maximize your returns, but that’s not always the case.  Some steer their clients to bad retirement investments with high fees and low returns because they get higher commissions or other incentives to do so.  And there’s nothing currently in the law that requires advisers to put their clients’ interests first.

The Obama Administration has proposed new rules to change this and require financial advisers to act in the best interests of their clients. The move is designed to increase the amount investors receive in retirement.

Americans may lose as much as $17 billion every year because of bad financial advice from advisors with conflicts of interest, according to a report by the President's Council of Economic Advisors. Many financial advisors have a sales incentive to steer clients into investments that offer higher payments to the advisor but are not necessarily the best option for the client. According to the report, a retiree getting advice from an advisor with a conflict of interest when rolling over a 401(k) balance at retirement can lose an estimated 12 percent of the value of his or her savings.

To confront this problem, President Obama has directed the Department of Labor to promulgate new rules that require financial advisors to act like fiduciaries. This means they must put their clients' interests above their own. The new rules would prevent brokers and financial advisers from rolling over retirement accounts unnecessarily or putting clients' savings into investments with high fees and low returns when there are better options.

The Department of Labor will publish the new rules and then hold a hearing on the rules and accept public comments. The financial industry is fighting the proposed rules, arguing that they will disadvantage small savers by increasing costs. 

“What they are saying,” says business columnist Darrell Delamaide writing in USA Today, “is that they are currently willing to offer their services to the low-income bracket because they will reap even higher profit from hidden costs and fees. Their opposition to the rule is virtually proof that it is necessary.”

For more information about the new rules, click here and here. 

To read the report from the Council of Economic Advisors, click here. 

Retiring Abroad with a Long-Term Care Insurance Policy

As more people consider retiring abroad, questions arise regarding how an overseas retirement will affect long-term care insurance benefits. If you are planning to relocate out of the country and want to purchase or already have long-term care insurance, the first and best advice is to read carefully the fine print on your policy.

Not all long-term care insurance policies cover care in other countries.  Even if care is covered, the benefits are often severely limited. Some companies pay benefits overseas, but the benefit is less than the amount an insured getting care in the U.S. receives. For example, one insurer pays up to 50 percent of the nursing home benefit purchased for care received outside the United States. Other companies provide  a full benefit amount, but for a limited time (for example, one year).  Once you reach the limit, you will be required to move back to the U.S. to continue your remaining coverage. Still other companies limit both the benefit and the time covered, or they may cover you only if you relocate to an English-speaking country.

To find out whether your policy covers long-term care in other countries, first look at the exclusions. Next look for a section called "international benefits" or "out of country coverage." If your policy does limit care overseas, you should not cancel it immediately because it can be hard to get coverage again. Talk to your insurance agent, attorney or financial advisor first. Instead of cancelling, it may make sense to lower your premium by reducing your benefits.

For more information on what to consider before moving to another country, click here. 

For more about long-term care insurance, click here.

Scientists have found that non-invasive ultrasound technology can be used to treat Alzheimer's disease and restore memory. Researchers discovered that the innovative drug-free approach breaks apart the neurotoxic amyloid plaques that result in memory loss and cognitive decline.  The Report was published  in Science Translational Medicine,  Vol. 7, Issue 278, pp. 278ra33 (March 11,  2015), and reported in Science Daily.

Art Collector's Estate Claims Attorney's Drafting Error Cost It $25 Million

The estate of a prominent art collector has sued the attorney who drafted the art collector's will for legal malpractice. The lawsuit, filed in the New York Supreme Court, claims the attorney's error will cost the estate $25 million in taxes.

Collector Robert Ellsworth, whom The New York Times once called “the king of Ming” for his renowned collection of Asian art, hired attorney George Bischof to draft his will. In 2010, Bischof drafted a will that left Ellsworth's estate outright to his friend, Masahiro Hashiguchi, with six charities as contingent beneficiaries. In 2013, Ellsworth changed his will to name Bischof as the sole trustee of a residuary trust. Under the new will, the residue of the estate was left to a discretionary trust that benefited Hashiguchi during his life and then the remainder of the trust was left to charity.

The lawsuit alleges that Bischof drafted the will in a manner that did not allow the trust to qualify as a charitable remainder trust and therefore meet the criteria for the federal estate tax charitable deduction. According to the lawsuit, because of the "negligently and carelessly" drafted trust, the estate will have to pay $25 million in estate taxes that it wouldn't have had to pay if the trust had been properly drafted.

For more about this case from artnet, click here. 

Some Senior Living Facilities Discriminating on the Basis of Disability

Continuing Care Retirement Communities (CCRCs) sound like a great idea, and in many ways they are.  They offer residents access to the entire residential continuum -- from independent housing to assisted living to round-the-clock nursing services -- under one "roof."  Residents pay an entry fee and an adjustable monthly rent in return for the guarantee of care for the rest of their life.

But while the transition from one level of care to another may be advertised as seamless, anyone considering a CCRC should be aware that moving to a higher level of care could mean losing access to privileges and amenities they once enjoyed and took for granted.  Depending on its policies, a CCRC may mandate separate facilities and activities for those requiring different levels of care. Although such restrictions may be illegal, they are not uncommon.

For example, the New York Times recently reported on the case of Ann Clinton, a resident of a CCRC in Huntsville, Alabama, who found herself barred from her cherished bingo games when she moved to the facility’s nursing unit while rehabilitating after back surgery. 

Clinton and her husband moved to the CCRC in 2012, paying a deposit of $351,424, and about $4,600 a month in fees.  Mr. Clinton shifted to the assisted facility unit and then to the nursing unit, where he died in September 2014. Through it all, Ms. Clinton, 80, looked forward to her weekly bingo game with friends and other residents of the CCRC’s independent living unit.

After her back surgery, Ms. Clinton was still able to attend the games using her motorized scooter.  But to her shock and surprise, she was eventually barred from them because she was living in the nursing unit.  

This isn’t the first time the Times reported on such a policy. In 2011 it covered the controversy that erupted when a CCRC in Norfolk, Virginia, declared that a popular waterfront dining room was off-limits to those in the assisted living and nursing units, and could be used only by independent living residents.  Suddenly longtime friends and even some married couples could no longer eat together because they lived in separate parts of the facility.  After residents contacted a lawyer and the news media, the CCRC reversed its policy.

The same thing had happened to the Clintons, according to the Times.  After Mr. Clinton moved to the CCRC’s assisted living wing, he was denied admission to the main dining room to eat with his wife, who was still in the independent living section.  The facility eventually changed its policy, allowing assisted living residents to use the dining room if independent living residents invited them.  

The CCRC has since suspended the bingo game that Ms. Clinton was barred from attending.  Ms. Clinton’s son says he plans to file a lawsuit on his mother’s behalf and is looking for a lawyer.

Attorneys who advocate for the elderly believe that excluding residents based on the level of care they require violates anti-discrimination laws like the Fair Housing Act and the Americans With Disabilities Act.  Admittedly, CCRCs may be trying to segregate residents in the belief that some residents would prefer not to have contact with those who are more incapacitated. 

“But that’s why we have anti-discrimination laws,” Eric Carlson, an attorney with the National Senior Citizens Law Center, told the Times. “You don’t want to capitulate to people’s prejudices.”

For more about CCRCs, click here. 

For more about senior living options, click here.