A reader expressed concern about her parents, who have not shared information about their financial affairs with any of their children. She and her two brothers don’t even know if their parents have wills. The children are uncomfortable about bringing up the subject to their parents, even though the siblings are all adults.

What should you do if you are in this situation?

First, let me share what I have seen work best in my money management practice.

I think it is important to understand how much interaction a client wishes to have with his or her children, so I ask the client up front. As clients need more care, it helps me to understand how much moral support will come from family members.

I already know the client’s attorney and accountant, since we go over issues that might affect the wills, trusts, insurance policies and assets before committing to an investment program.

I also get to know the children in many cases. They do not necessarily know their parents’ financial details. Still, there is great comfort in meeting their parents’ close advisers.

But what happens in other cases, when the children just don't know what’s going on?

In my experience, a lot depends on the family dynamics. If there is a close, supportive relationship, then parents just need to be nudged a little.

If there is a good relationship between the parents and the children, there is a high likelihood that parents may appreciate a helping hand if it is offered. One way to start a dialogue is to ask if they need help organizing documents. That list of documents should include:

1. Wills and trusts

2. Insurance policies

3. Deeds

4. Bank statements, securities statements

5. IRA beneficiary designations

6. Stock certificates

7. Recent tax returns

8. Powers of attorney

If your parents do not wish to show you these documents, you’ll have to respect their wishes.

You may ask that they make a record of where important documents are kept, including safety deposit boxes and other valuables -- for future reference. You will also want them to make a list of their attorneys, accountants and financial advisers, in case you need to contact them in an emergency sometime in the future.

When parents age, children may have to get involved more than they were before. Some elderly parents need to be cared for physically as they grow older. I have had experience with healthy clients who became ill suddenly, requiring hospitalization and nursing home care. The worst situations are those in which the parents did not trust the children enough to talk to them openly. While everyone wants to be helpful, in the worst cases, confusion and infighting among siblings can result.

If you are a parent, consider whether it’s time to think about engaging your children in a discussion about your finances and your wishes. If you are a child, offer to help, but don’t take over. Mutual respect is most important at this stage of life.

Julie Jason, JD, LLM, a personal money manager (Jackson, Grant Investment Advisers Inc. of Stamford, Connecticut) and award-winning author, welcomes your questions/comments (readers@juliejason.com). Please visit www.juliejason.com.

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION

The COVID-19 pandemic in 2020 brought a halt to numerous activities, but it did not prevent a surge of both new and experienced individual investors from getting involved in the stock market, according to a recent FINRA study. FINRA, the Financial Industry Regulatory Authority, regulates brokerage firms.

However, the study pinpointed a problem to solve: Improvement is needed in investment knowledge.

FINRA Investor Education Foundation’s president, Gerri Walsh, said, “[L]ow levels of investment knowledge among all types of investors in the sample -- new and experienced -- underscore the importance of educating investors about risk and reward, costs and fees, tax consequences of investing and other key concepts.”

As a proponent of financial literacy education, I see this as an opportunity to spread the word about educational resources.

For example, I am a strong supporter of Form CRS, a new Securities and Exchange Commission (SEC) disclosure document. As of June 30, 2020, the SEC requires brokerage firms and registered investment advisers to provide retail investors with a two-page (or four-page) customer relationship summary, known as Form CRS.

The FINRA survey addressed Form CRS by asking: “In 2020, your brokerage firm sent you a short document describing the firm’s services, fees, costs, conflicts of interest, disciplinary history, standard of conduct and other information. Which of the following statements most accurately describes what you did with this document?”

“I read everything carefully”

“I read most but not all of it”

“I skimmed it quickly”

“I didn’t read any of it”

“I don’t remember receiving it”

A plurality of all investors (33% of “New Investors,” 37% of “Experienced Entrants” and 40% of “Holdover Account Owners”) reported they skimmed Form CRS.

New Investors were defined as those who opened at least one nonretirement investment account in 2020 and did not own a taxable investment account before that year. Experienced Entrants opened a taxable investment account during 2020 and also owned one before 2020, while Holdover Account Owners continued a taxable investment account that was opened before 2020, but did not open a new one during 2020.

According to the study, when it came to the CRS: “[A] greater percentage of Experienced Entrants (18%) and New Investors (17%) reported reading everything carefully when compared to Holdover Account Owners (14%). Interestingly, 14% of Holdover Account Owners reported not reading any of the form, while just 8% of both New Investors and Experienced Entrants reported not reading any of it.”

The study also had a comparison of the level of attention investors gave to Form CRS with how much they gave to investment disclosures. About a third of all the groups (33% of New Investors, 30% of Experienced Entrants and 29% of Holdover Account Owners) said they “either always or often reviewed disclosure information about specific investments prior to making a purchase. By comparison, 39% of New Investors, 43% of Experienced Entrants, and 34% of Holdover Account Owners reported they either read everything carefully or read most (but not all) of Form CRS.”

At this point, if you have not read Form CRS for the brokerage firm or investment adviser you do business with, now is the time. It will take you all of 10 minutes to read it. If you don’t have the CRS, log onto the firm’s website for a copy and email me if you can’t find it (readers@juliejason.com).

Another educational resource is FINRA itself at tinyurl.com/rp3uken.

To read FINRA’s report on the survey, “Investing 2020: New Accounts and the People Who Opened Them,” go to tinyurl.com/z5ispko3.

Finally, I have a favor to ask. I’m wondering if you have read your firm’s CRS. Share your experience by taking my survey here: tinyurl.com/y6bbuo8a.

Julie Jason, JD, LLM, a personal money manager (Jackson, Grant Investment Advisers Inc. of Stamford, Connecticut) and award-winning author, welcomes your questions/comments (readers@juliejason.com). Please visit www.juliejason.com.

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION

If you are looking at a heap of paperwork that represents your tax information and possible questions related to it, know this: The IRS has numerous tools that can be useful when it comes to tax time. This year in particular, you may need some guidance on special rules that apply to 2020 IRA withdrawals and rollovers.

One of these tools is the Interactive Tax Assistant (tinyurl.com/128ig935). The website describes the ITA as “a tool that provides answers to several tax law questions specific to your individual circumstances.”

There are more than 50 topics listed on the ITA website. Let’s turn to special Coronavirus Aid, Relief, and Economic Security (CARES) Act provisions that affected withdrawals from IRAs.

Under the heading “Retirement: Pensions, IRAs, Social Security” is the topic “Do I Need to Report the Transfer or Rollover of an IRA or Retirement Plan on My Tax Return?” By clicking on it, you’ll find a list of information you will need to have handy, including what type of retirement plan the distribution came from and went to (and how long between the transfer if it wasn’t moved directly), and whether there is a cost basis to recover.

Once you have that gathered, you can click the blue “Begin” tab.

If you are wondering if you’ll have to pay taxes on the RMD that you rolled over by Aug. 31, 2020, the ITA will take you through the following questions and provide a conclusion based on your answers. But, be alert to the ITA disclaimer: “This does not constitute written advice in response to a specific written request of the taxpayer within the meaning of section 6404(f) of the Internal Revenue Code.” Bottom line: You’ll have to review your results with your accountant before taking any action.

Back to the ITA’s questions:

What tax year are you asking about? Select 2020.

Was the transfer made or distribution received from the retirement account on or before December 31, 2020? Yes.

What type of retirement account did the distribution come from? There are a number of choices. For this example, I’ll select “Traditional or SEP IRA.”

What type of retirement account was the distribution moved to? Again, I’ll select “Traditional or SEP IRA.”

Are you asking about the rollover of a required minimum distribution taken in 2020? Yes.

Was the amount of the required minimum distribution rolled over on or before August 31, 2020? Yes.

At that point, the answer appears: “Distributions of amounts up to and including your required minimum distribution taken in 2020 are eligible to be rolled over under the CARES Act.”

Simple enough, but the next part may be confusing: “The repayment will be treated as a rollover but will not be treated as a rollover for purposes of the one rollover per 12-month period limitation or the restriction on rollovers for nonspousal beneficiaries.” This language confirms that for this special 2020 RMD rollover, you don’t have to worry about the 12-month restriction that normally applies to IRA rollovers.

What if your issue was not with an RMD, but instead a coronavirus-related distribution from your IRA? If not for the CARES Act, a withdrawal (distribution) would have been taxable. For more on this type of distribution, see tinyurl.com/y6nvp7zm.

Again using the ITA and the same topic, you’ll find that the first four questions from above are the same.

When asked whether the rollover in question was an RMD in 2020, I answered “no.” That brought up the following questions:

Are you asking about the repayment of a qualified coronavirus-related distribution? Since I wanted to see how a coronavirus distribution was handled by the program, I answered “yes.”

Was the distribution from an inherited retirement account? No.

Then the answer: “Qualified coronavirus-related distributions that are repaid are treated as a trustee-to-trustee transfer and are not included in income.” The language confirms that for this special 2020 coronavirus rollover, you don’t have to worry about the 12-month restriction that normally applies to IRA rollovers. That is, the rollover is not taxable.

As mentioned before, you should check with your accountant before taking any actions because you want advice that is directly related to your personal tax situation.

Julie Jason, JD, LLM, a personal money manager (Jackson, Grant Investment Advisers Inc. of Stamford, Connecticut) and award-winning author, welcomes your questions/comments (readers@juliejason.com). Please visit www.juliejason.com.

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION