KARYN FALLON, PEMBROKE, N.H.
Tell them to send their stockbroker some flowers. He has saved them, and you, a potful of trouble.
Your parents could indeed make your children joint owners by adding their names to the stock certificates, New stock certificates would be issued at no or minimal charge. But what if your parents wanted to sell? They’d need the children’s permission (all joint owners must sign), and minors can’t legally give permission. You could sign for the children–but only if you petitioned the court to name you the legal guardian of their property That’s a time-consuming process and could cost as much as $2,000 in legal fees.
If your parents died and the children received the stock as joint owners, they couldn’t sell it until they’re 18. It you sold. as guardian, you’d have to file annual reports with the court to prove that you haven’t mishandled the proceeds. When the children did finally reach 18, they’d own the stock (or cash) outright and could blow it on anything they wanted.
The cheapest and easiest way of directing stock to minor children, while keeping control of it during your lifetime, is to leave it to them in your will, in trust (the will names a trustee to look after the funds). Alternatively, put the stock into a living trust, which you establish during your lifetime. That way, the inheritance won’t go through probate. Either way, the money can be reserved for the children’s education or delivered to them when they grow up, according to Mark Knobel, chair of the committee on trust and probate for the Nevada state bar.
Q: In January I received a letter from a company called SeaQuest Partners. It said it would locate $555.55 I’m owed by some government agency for a 50 percent fee. When I said the fee was excessive, SeaQuest dropped it to 30 percent. In Massachusetts, finder’s fees are not supposed to be more than 10 percent. Do you think this company is legitimate?
ROBERT ENEMARK, DUXBERRY, MASS.
A:
You can quit peering into this gift horse’s mouth, SeaQuest Partners is legitimate, say two state experts on unclaimed property. It checks federal, state and local government archives, to identify checks that were returned as undeliverable–for example, tax refunds, vendor payments and court-approved distributions from bankrupt companies. Then it finds the owner and offers to recover the money for a fee. You pay only if you collect the cash. SeaQuest president Cindy Soberer gives you this hint: your $555 is at one of more than 700 governmental entities and comes from a bankruptcy. Now can you guess?
Every state has an abandoned-property office that receives funds left unclaimed at private entities like banks, brokerage firms, utilities and corporations that mail dividend checks. Some offices also handle unclaimed state and local government payments. We checked with the one in Massachusetts; it doesn’t have your name. Most states charge nothing to return your funds,if you write to them directly. There’s often a limit (like 10 percent) on what an outside finder can charge. But that limit doesn’t apply to the hard-to-find funds retained by government agencies, which is the field that SeaQuest mines.
Q: I’m retired from the firm I rounded and worked for for 31 years. Last February I took the entire proceeds of my profit-sharing plan, amounting to $303,154, and rolled them into an Individual Retirement Account with the 14-year-old First Pension Corp. in Irvine, Calif. First Pension was to have administered my plan; I intended to choose the investments. It turned out that First Pension had been committing fraud for years. The firm is now bankrupt and 70 percent or more of my money may be gone. Is there no regulator to preclude massive stealing by pension administrators?
HUDSON DEGRAY, BISHOP, CALIF.
A:
Surprisingly, no. In fact, pension-plan administration is an ideal business for people who want to launch a fraud, in the view of Lisa Gok, assistant regional director for enforcement at the Securities and Exchange Commission in Los Angeles. New funds pour in steadily, thanks to automatic pension savings; clients don’t go looking for their money for perhaps 20 or 30 years; and no state or federal regulator oversees all the functions that an administrator performs. Scott Harrison, chair of the National Institute of Pension Administrators, says the firms don’t even have to carry insurance (although the reputable ones do).
A pension administrator handles the paperwork for so-called self-directed plans. These are not the plans managed by employers, like 401(k)s. The money is in an outside account, and you direct the investments yourself. As long as your money is invested in traditional ways- in CDs, stocks, mutual funds and the like- it’s safe from a sleazy administrator. At risk are new funds like yours, which haven’t yet been allocated to specific investments, as well as any investment that the administrator has an interest in (First Pension was involved in fraudulent real-estate partnerships). Because your money was in a bank, you assumed it was safe. But First Pension illegally tapped the accounts–and losses like those aren’t covered by federal deposit insurance.
The three principals of First Pension pleaded guilty to fraud and will be sentenced next mouth. Between $21 million and $25 million in cash allegedly disappeared, plus an estimated $100 million in partnership money. One option under consideration for distributing the remaining funds: investors like you, who came late to the slaughter, might get a higher portion of your money back than investors who were at First Pension for years.
Best advice to other investors: keep self-directed IRAs and Keoghs at well-known banks or brokerage firms, and stay away from partnership promoters
