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Q&A with Suze Orman
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In family we trust
By Suze Orman
I am 75 and in the process of updating my
trust. I want to make it possible for my
daughter, who is to be a co-trustee, to use
my funds for my care should I not be able to
do so due to a stroke or dementia. What is
the best approach for this?
■ Selecting a financial planner
■ Late-life home purchase
Suze will answer
selected questions in
this bimonthly column.
She regrets that
cannot be answered
YOU, MY DEAR, are one of the very smart ones to
have a trust, and I love that you are taking the steps
today to make sure your daughter can easily manage
your finances if the need ever arises. One of the most
important parts of your living revocable trust should
be that it has an incapacity clause in it, which will
allow your daughter to take over handling your affairs
if you can no longer manage things on your own.
The incapacity clause is key; it is what will make
it easiest for your daughter to seamlessly step in.
Now what is important is to make sure the clause
states that only one doctor has to declare you incapacitated. You want to avoid a situation where your
daughter would need to get multiple doctors to render the same verdict.
make any changes to your investments, insurance,
etc., how will they get paid?
You want to work with planners who can give
you the flat-out best advice without having to worry
how they will be paid. The National Association of
Personal Financial Advisors ( www.napfa.org) has a
searchable database of professionals who do not
Suze Orman’s TV
How should I select a financial planner?
show airs Saturday
nights on CNBC. Suze
can be contacted at
I am 68 and would like to buy my own home.
I have a retirement income of $3,000 per
month. I have no debt. I also have a tax-shel-tered annuity of $50,000, which can be surrendered now with a penalty of $450. I have
$255,000 in American Funds.
I would like to buy a house for $300,000.
Should I borrow $215,000 (which I have already been approved for), then pay $85,000
in cash? Also, should I take the $50,000 from
the annuity and the rest from my stocks, or
all from my stocks?
Right now I pay $1,000 for rent but am
not happy here.
ALWAYS GO TO the office of the planners; never
have them come to you. That way you can make sure
that they are neat and organized. If they cannot keep
their own items in order, they will not be able to keep
your life in order either.
Listen carefully to the questions they ask you. If
they simply ask how much money you have and then
tell you what to do with it, end the meeting right
there. A good planner will ask you about all aspects
of your life, such as your health, your relationships,
your outstanding debts, etc.
Two of the most important factors to consider
are the credentials of the planners, and how they
Planners who have earned the Certified
Financial Planner (CFP) designation have successfully completed a rigorous education course.
You can learn more, and search for CFPs in your
area, at www.cfp.net.
One of your first questions when interviewing
candidates should be how you will pay them. In fact,
you should not have to ask them; they should volun-
teer this information. This should be a very straight-
forward conversation. You want to work with
a planner to whom you pay a flat or hourly fee.
Avoid planners whose compensation is based
on what they recommend you buy and sell.
Planners and advisers who are commission-based
must constantly wrestle with a conflict of interest:
If the best advice is for you to sit tight and not
o s a s , yo u a s s o o w m. c d a h l
Verdugo City, California
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JANUARY 2013 ;e Costco Connection 19
TAKING ON NEW debt at your age isn’t something
I typically recommend. And in your case, I think you
are dangerously underestimating the cost of home
ownership. Even if you were to qualify for a great
interest rate, the monthly payment on a 30-year
fixed-rate loan would be about the same as your
$1,000 rent. But that’s just the start of your costs. As
an owner you will also be responsible for the property
taxes, home insurance and ongoing maintenance of
the home. I advise first-time homebuyers—
regardless of their age—to add at least 30 percent to their
base mortgage amount to account for all the additional ongoing costs of owning a home.
Can you seriously afford monthly housing costs
of at least $1,300 a month? Coming up with the
$85,000 in cash would require withdrawing more
than $85,000 from your accounts; remember there
are taxes to be paid on withdrawals. Based on the
information you’ve provided, it’s hard to see how
your remaining assets would generate enough
money to be able to comfortably afford your homeownership costs.
If you really want to make a move, lower your
target home price. You want a monthly mortgage
payment of no more than $700, so when you add in
all the other costs your ownership costs stay in the
vicinity of $1,000 a month. C