Updated: Feb 20, 2020
Dear Clients and Friends,
I’d like to tell you a short story regarding an unfortunate and poorly timed tax bill that a client of ours recently received. This story is exasperating because the client’s bill was the result of noble intentions. The moral of the story is: please include us in all conversations about money, no matter how simple the topic at hand may seem. We promise that you will never bother us. We are your financial servants; don’t be shy.
This is a short story about a dearly beloved client (we’ll call her Elinore) and her son (we’ll call him Michael). Several years ago, Elinore was due to have surgery. She asked Michael to become an authorized signatory on her checking account in case she required assistance during her recovery. This meant that Michael would be able to disburse checks from Elinore’s account on her behalf, but the funds would still belong solely to Elinore. The two of them went to the bank to accomplish this task. Mom’s surgery was successful, she didn’t need assistance with her finances during recovery, and everyone was living happily thereafter.
Many years later, Michael passed away suddenly. (On a personal note: Michael had been a client of ours for 17 years and we have the privilege of working for four generations of his family. Michael’s mom Elinore, Michael’s brothers, daughters, and grandchildren are all part of the MORWM family. A four-generation family is not unique to us, but it’s certainly not common in our industry. Michael was loved dearly and will be sincerely missed.)
A few weeks ago, we learned that the bank had mistakenly added Michael to Elinore’s account as a joint owner rather than as an authorized signatory. This meant that Michael then legally owned half of his mother’s checking account. When he recently passed away, Elinore “inherited” Michael’s half of her checking account by rights of survivorship. This matters because Elinore then received an inheritance tax bill for 4.5% of the half of her own checking account that she “inherited from her son.” On a $50,000 account, that is a $1,125 tax on her own money.
Michael had never mentioned this transaction to us. He was a brilliant physician by training and a research scientist by trade. This was a simple task and an easy way to make sure that someone could pay mom’s bills during her recovery. Michael was so polite that he likely didn’t want to bother us with something so seemingly trivial. But, had he been added to the account as an authorized signatory instead of as a legal owner, ownership would not have changed hands, and this tax bill would not have been incurred.
The lesson of the story is this: please keep us informed of even the simplest financial decisions so that we can double-check things for you - especially when authority over or ownership of an asset is granted to another person or party. We have such respectful clients that many of you worry about bothering us with simple things. But don’t we always say that it’s the simple things that count.
We are here for you always.
Have a lovely weekend,
-Your unresting and committed family at MORWM
The preceding is for illustrative purposes only. Actual performance and results will vary. This does not constitute a recommendation as to the suitability of any investment for any person or persons having circumstances similar to those portrayed, and a financial advisor should be consulted.
Matthew Ramer, AIF® Principal, Financial Advisor MOR Wealth Management, LLC
1801 Market Street, Suite 2435 Philadelphia, PA 19103 P: 267.930-8301 | c: 215-694-4784 | f: 267.284.4847 |
601 21st Street, Suite 300 Vero Beach, FL 32960 P: 772-453-2810
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