The Independent Investor: What Happens to Your Pet After Your Death?

If you are one of the 70 percent of the population that considers their pet a member of the family, you should review your estate planning documents. Otherwise, there is a good chance your pet will either end up in the pound, or worse.

This hits close to home for many of us. If my wife and I were to die, for example, who would take care of our chocolate Lab, Titus?

There are few people who we would trust to take care of him. Compounding the problem is the fact that he is 8 years old and suffers from arthritis. I discovered that simply putting some instructions in a will was neither legally binding nor particularly useful. Unless we do something different, Titus could be condemned to imprisonment and a life without love.  

You must understand that legally a dog, cat, horse or any other kind of pet is not considered a human being. They are considered your property. As such, Titus is our "property" and the law states that you can't leave property to a piece of property.

Therefore (until recently and only in some states) your pet can't be a beneficiary in a will. Your instructions within a will are not enforceable. I might state that Bri (our dog whisperer) gets Titus in the event we pass, but a will cannot instruct Bri to care for the dog, take him to the vets, etc. Don't forget, too, that your will is not enacted immediately. All wills have a waiting period, sometimes months, even longer if it is contested.  Who is going to care for your pet in the meantime?

It is also difficult in a will to disburse money to someone for your pet's care over a pet's lifetime since a will is a static (as opposed to an on-going) document. And changes to a will are at the court's discretion. Do you really want some judge, who may or may not be an animal lover, deciding your pet's fate?

You may recall the now-famous case of Leona Helmsley, who left $12 million in trust to Trouble, her white Maltese, while giving nothing to two of her four grandchildren. In 2007, a year after she died, a judge reduced the dog's wealth by $10 million. Still, $2 million was enough for Trouble to live a life of luxury, until she died at age 12 in 2011.

In some cases, pet provisions in your will may only be "honorary." Fortunately, 40 states and the District of Columbia recognize statutory pet trusts, so that pet owners who direct someone to take care of their pet and bequest funds for its care could work through such a legal document. In the states without statutory pet protections, however, these provisions are "honorary." That means the person who receives the funds decides whether or not to use them for your pet's care. There is nothing to prevent that person from dumping your pet and taking a vacation with your $5,000.

The person to whom you entrusted your pet to could be a loving, caring person, but what if the person is allergic to your pet, or already has pets of their own and conflict develops between them? The person may live or move to a rental apartment or community that excludes pets. As you now realize, there is a lot to consider here.

But there are avenues you can pursue to protect your pets. There are legally enforceable documents that can guarantee an animal's continuing care. Some statues such as the Massachusetts General Laws chapter 203E, Section 408 are relatively new. We will be discussing pet trusts in our next column with an expert attorney on the subject, Holly Rodgers.

Bill Schmick is registered as an investment advisor representative and portfolio manager with Berkshire Money Management (BMM), managing over $200 million for investors in the Berkshires.  Bill's forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.
 

The Independent Investor: 'Watch the Gap Please'

If you haven't realized it by now, Medicare has a lot of "gaps" in its coverage. In order to close that gap, various private insurance companies offer plans that cover a lot of out-of-pocket costs — for a price.

Bare-bones Medicare coverage can leave you with some steep medical bills. As we discussed in our last column, if you are admitted to the hospital, for example, your first bill will tally $1,216 or more, which is the deductible you pay just for being admitted. After that, you pay 20 percent of the fee for every doctor visit, lab test, MRI, X-Ray and on and on. Remember, too, that there is no yearly limit for what you may have to pay beyond your basic Medicare Part A and B coverage.

Depending on which plan you choose, a Medigap plan will pay some or all of these expenses. Some plans will pay the coinsurance for hospital stays; others could pay for the coinsurance expense for outpatient care. Other plans pay for additional costs like Part A and B deductibles, coinsurance for nursing care, and even emergency care outside of the U.S.

As you might expect, the most comprehensive plans have the highest monthly premiums, although once you pay that premium, your insurance company pays everything else. That means you pay nothing for that quarterly medical checkup, that emergency room visit, or admission to the hospital.

Here in Massachusetts, you have a guaranteed right to buy any Medigap policy sold in your area, beginning on the first day of the month after turning the age of 65. You do have to be enrolled in Medicare Part B to qualify. Those Medigap insurers cannot deny you coverage or charge you a higher premium due to existing health conditions. In most cases, Medigap will cover a pre-existing condition immediately, but some policies will delay coverage of out-of-pocket expenses for the first six months. Any doctor that accepts basic Medicare coverage will also accept your Medigap insurance.

There is another option called Medicare Advantage. These plans offer all your Medicare coverage benefits in one package plan. Hospital care, medical care and prescription drugs are covered. Some plans even cover vision and dental care plus other services. Most Medicare Advantage plans also provide financial protection. They place a limit on how much you pay out-of-pocket per year. Under this program, you share in the costs of your health care by paying co-pays or coinsurance. After you pay up to the plan's out-of-pocket limit, the Medicare Advantage plan pays 100 percent of all your medical costs. One caveat, though; it does not include your prescription drug costs.

Under Medicare Advantage plans, you will pay less if you receive care from doctors, hospitals and other providers that participate in the plan's network.  Each plan will build different networks of medical providers who provide quality care. There is a "star" quality rating that ranks these plans and naturally the higher the stars, the more customers they get.

As with Medigap, Medicare Advantage Plans provide consumers an array of choices. How do you choose? First, you check to see if your doctors are on the insurance company's plan  and which hospitals each plan offers. Make sure your physical therapists and pharmacy are also on the plan. If none or some of the above are not listed, would you be willing to switch in order to save money?

Some more questions you might ask are: does the plan you are considering provide good coverage of the health services you use now, or what you may use in the future? Does the plan cover all the existing drugs you need and what are the co-pays? Do you need or want extra benefits such as vision or dental?

Finally, figure out how much you will have to pay per month and year for the medical benefits each plan offers. That means the premium, deductible, co-pays, coinsurance and out-of-pocket expenses. Remember while making your decision, a plan with a low premium might not be the best bet if the co-pays are higher for certain services you use frequently.

Note: Several weeks of Mr. Schmick's columns in January & February disappeared into the ether on their way to iBerkshires. They are being back posted to the dates on which they should have appeared.

Bill Schmick is registered as an investment advisor representative and portfolio manager with Berkshire Money Management (BMM), managing over $200 million for investors in the Berkshires.  Bill's forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.

The Independent Investor: Medicare, Why You Need More Than Part A & B

Medicare costs jumped 3.4 percent last year. Drug prices gained a whopping 11 percent. Medicare parts A&B does not cover prescriptions and the gap between what it does cover and your out of pocket expenses could break you.

Last week, while walking Titus, our chocolate Lab, I bumped into a fellow dog walker. I'll call him Abe. Abe is retired and on a tight budget. In an effort to save money, he elected not to acquire drug prescription insurance called Medicare Part D.

"After all," he explained, I'm in my late seventies and aside from aspirin and the occasional antibiotic for the flu, I've been drug-free for as far back as I can remember." Until now — Abe has just been diagnosed with diabetes and is required to take self-injected drugs several times a week in his stomach for the illness. That works out to $39.95 a day for the rest of his life.  

It could happen to you when you least expect it and can't afford it. Medicare Part D is offered by private insurance companies that are approved by Medicare. Every plan has what is called a "formulary." A formulary is simply a list of drugs each plan will cover. The insurer will charge you a premium per month and most have an annual deductible you must meet before the insurance kicks in.

You need to do your research because what drugs and how much you pay for it will vary from plan to plan. It's called a "tier" system where some insurers don't carry a specific drug or only the generic version of it. Others may reimburse you differently, depending on what tier your drug (s) of choice falls into. If you are already taking a prescription drug(s) you need to check for the best deal you can get among insurers. There's also the infamous "doughnut hole" that you must consider.

Medicare drug coverage plays a portion of your drug costs and you pay the rest. As your drug costs add up, you may have to pay more and more of the costs (the doughnut hole) up to a certain level ($4,950 in 2017). After that, you pay only 5 percent of your drug cost for the rest of the year and then it starts all over again.

As you might expect, people with higher incomes pay an extra amount every month for Medicare Part D. If you earn $85,000 or less ($170,000 for a couple), you pay whatever basic premium your plan charges. Over that, you could pay as low as $53.50 a month to as much as $294.60 a month, depending on your income level.

In most cases, if you owe this extra amount, Social Security will deduct it from your Social Security check. To determine your 2017 Medicare premiums, Social Security will normally look at your federal income tax return you filed in 2016 (for tax year 2015). If your income has gone down since then, which usually happens when one retires; you can request a new decision from Social Security.

In our next column, we will examine two additional forms of insurance that you should consider: Medigap Insurance Plans and Medicare Advantage. Both can assist you in covering the gap between what Medicare pays for and what you do.

Note: Several weeks of Mr. Schmick's columns in January & February disappeared into the ether on their way to iBerkshires. They are being back posted to the dates on which they should have appeared.

Bill Schmick is registered as an investment advisor representative and portfolio manager with Berkshire Money Management (BMM), managing over $200 million for investors in the Berkshires.  Bill's forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.

The Independent Investor: All You Need to Know About Medicare

More of us are signing up for Medicare every day. And like social security, there are plenty of unanswered questions for those of us who are beginning the process. There are plenty of places to seek answers, but how to separate facts from sales pitches from health insurance brokers is part of the problem. Here is a primer that may help you navigate these muddy waters.

Presidents as far back as Teddy Roosevelt in 1912 toyed with the idea of a government-sponsored health insurance program. Harry S. Truman and John F. Kennedy both tried and failed to get an act passed. But in 1965, under the administration of Lyndon B. Johnson, Medicare was finally passed.

You qualify for Medicare at age 65, or older, if you are a citizen or permanent legal resident who has lived in the U.S. for at least five years.  Here are the qualification rules: You (or your spouse) need to have worked long enough to qualify for Social Security or railroad retirement benefits, or worked as a government employee or retiree who may not have paid into Social Security, but has paid Medicare payroll taxes while working.

In addition, you qualify for Medicare if you are disabled and have received Social Security benefits for at least two years. A disability pension from the Railroad Retirement Board or Lou Gehrig's disease, permanent kidney failure, and a kidney transplant also counts toward Medicare benefits as long as you or your spouse have paid some Social Security taxes over a certain length of time.

Last year, nearly 165 million American workers were contributing to Medicare through payroll taxes and roughly 57 million people are receiving Medicare benefits, with 9.1 million of them disabled.

For those who don't know it, Medicare has two main parts: Medicare Part A, which is hospital insurance that helps pay for inpatient hospital care as well as short-term care in a skilled nursing facility. It will also partially cover in-home care and/or hospice care.

Medicare Part B is medical insurance that helps pay for outpatient care: things like doctor visits, tests, medical equipment, supplies and some home health services. Many preventive health services such as screening for cancer, heart disease and diabetes are free under Part B.

As long as you or your spouse paid Medicare taxes during your working life, you don't have to pay a monthly premium for "A," but you will have to pay some costs like co-payments, co-insurance and hospital deductibles. The Medicare system is based on benefit periods. For example, a hospital stay is a "benefit" that begins on the day you're admitted. It ends when you haven't received any inpatient care for 60 days.

You will need to pay a deductible of $1,316 (in 2017) for every benefit period. You pay nothing after that for up to 60 days, but for every day after that you remain in the hospital, you are charged a co-pay that starts at $329/day.

You do pay a monthly premium for Part B, which is based on your yearly income. For those filing a joint tax return of $170,000 or less ($85,000 or less as an individual) you will pay $134 a month. Your payments increase on a sliding scale with those who are making more than $428,000/year paying the top premium of $428.60/month ($214,000 or more as an individual). In addition, there is a $183 deductible you will pay for Part B in 2017.  After that, you will typically pay 20 percent of the cost of any medical care.

The bottom line here folks is that Medicare, contrary to many reader's impressions, is not free and costs can mount up quickly depending on your health problems. Remember too that there is no yearly limit on how much you might be required to pay. In my next column, I will explore two kinds of insurance that you can buy that will protect you from any gaps between your health care costs and your income.

Note: Several weeks of Mr. Schmick's columns in January & February disappeared into the ether on their way to iBerkshires. They are being back posted to the dates on which they should have appeared.

Bill Schmick is registered as an investment advisor representative and portfolio manager with Berkshire Money Management (BMM), managing over $200 million for investors in the Berkshires.  Bill's forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.

The Independent Investor: A Circus by Any Other Name Is Still a Circus

By now you may have heard that Ringling Bros. and Barnum & Bailey Circus are set to close in May of this year. That's the third circus in as many years to close their doors. You might say the announcement marks the end of an era stretching back for almost 150 years. I disagree.

The circus will never die. It's been around since the Romans were sticking each other with swords. It is a venue that is constantly changing that I believe will simply continue to evolve. Society has moved on from the need to see blood and guts on the sandy floor of the arena. For the last century and a half, we have been entertained instead by death-defying feats, acrobatics, wild animals and loud music. In today's digital age, where kids (and adults) would rather sit at home and watch television or play internet games, the smell of peanuts and popcorn, intermingled with elephant feces and three rings of lion tamers, human cannonballs and clowns just doesn't cut it.

Over the years, dwindling audiences, rising expenses, competition from other sources, the lack of marketing savvy by owners, and the increasing efforts by animal rights activists have contributed to the dwindling supply of old-time circuses that at one time crisscrossed the country.

The rising cost of attending the circus may have also been an issue. Middle-class families, whose numbers are also shrinking, had long been the bread-and-butter of the industry. In some cities, tickets for a Ringling show could be as high as $125. The cheapest seats, at $25, were still almost twice the price of a movie ticket. Plus everyone expects to buy food and at least one souvenir during a circus event. For a family of five, the costs have become insurmountable.

Despite rising ticket prices, circus costs were also increasing by leaps and bounds. Transportation costs, alone, have doubled over the last five years. The star-system tradition was also adding to the red ink. Year after year, those whose acts brought in the most tickets demanded to be paid accordingly. Billboard names such as Emmitt Kelly, the sad-faced clown, the Flying Wallendas and Gunter-Gabel-Williams, the fearless lion-tamer, took more and more of the profits.

Worst of all was the cost of the animals themselves. At Ringling Brothers, one elephant alone costs $65,000 a year just to maintain. They had 40 of the big guys on the employee list. Add in the cost of other wild animals, plus the mounting lawsuits from animal activists, and you get the picture.

Some say the final straw of "greatest show on Earth" in this increasingly difficult business environment, was their decision last year to drop their elephants from the line-up. Attendance dropped even further as a result. Those who were asked said that without the elephants, a circus was just not the same. That may be true, but last year Cole, as well as the Big Apple Circus, both elephant-heavy big tops, also announced that they will be closing their tent flaps this year.

As the sun sets over the traditional animal-centric circus tent, a new group of modern-day acrobats, jugglers and dancers have taken the viewing public by storm. Led by Cirque du Soleil (the Cirque), a new industry has sprung up. Through marketing, research and innovation, these newcomers have captured the imagination and pocketbooks of an audience that numbers 150 million people in over 300 cities worldwide.

The Cirque realized through market research that what was important to circusgoers were three things: the tent, the clowns and the acrobatic acts — not animals. So they got rid of the most expensive element, the animals, kept the clowns (but swapped their slapstick humor for something more sophisticated), and glamorized the tent. As for the acrobats, they dropped the star system, added artistic flairs they borrowed from Broadway, and included special effects from other traveling acts.

Since then, plenty of imitators have followed in their footsteps. As a result, the present-day circus has evolved into something that is not quite an ordinary circus, but neither is it a classic theater production. What it is though, is successful. In less than 20 years, the Cirque has achieved a level of sales that took Ringling Brothers a century to achieve. The point is that the circus will be around much longer than me or you but like everything in life, it will just be different.

Note: Several weeks of Mr. Schmick's columns in January & February disappeared into the ether on their way to iBerkshires. They are being back posted to the dates on which they should have appeared.

Bill Schmick is registered as an investment advisor representative and portfolio manager with Berkshire Money Management (BMM), managing over $200 million for investors in the Berkshires.  Bill's forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.