Bob’s Journal for 9/1/22

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-Roger Michalski, Publisher, Eagle Financial Publishing

Newman’s Own and Your Estate Plan

You probably saw the news reports that the daughters of the late actor Paul Newman are suing the actor’s foundation, Newman’s Own.

The foundation was created to distribute to charities the profits from the various food products sold under the Newman’s Own label. The daughters are suing for the right to direct how more of the profits are distributed.

In the past, each daughter was allowed to designate the charities that received up to $400,000 annually from the foundation. Recently, the foundation directors reduced that amount by half.

The daughters’ argument is their father intended for them to direct the foundation’s contributions. They say the plan was for them to be named directors or officers of the foundation and have the power to direct the contributions.

Instead, their father named two of his long-time business advisors as the successor directors. The daughters say that’s because when the estate planning documents were finalized, Newman didn’t have the capacity to make such decisions and was subject to undue influence.

The problem for the daughters is that incapacity and undue influence are hard to prove.

The case has lessons for each of our estate plans.

The first lesson is not to wait to execute your estate plan and succession plan. Put them together when you think they won’t be needed for years. You always can amend and refine the plans over time.

The second lesson is to clearly state your intentions in writing. Don’t assume people know and won’t forget the goals and intent. While Paul Newman’s daughters said he wanted them to direct the contributions of the foundation, he never explicitly said so in the foundation’s documents or other writing.

The third lesson is to carefully select trustees, agents under a power of attorney and other fiduciary positions. As the late estate planner Joe Gandolfo said, money and power change people. If Newman’s daughters are correct, the foundation’s directors decided to change how the foundation operated instead of continuing Newman’s plan.

Social Security Improved Its Online Tools. Use Them

One positive effect of the pandemic is that Social Security improved its online tools and increased the number of actions you can take through its website. Beneficiaries and potential beneficiaries should take advantage.

The Social Security Administration’s employees finally are back to their offices and available for face-to-face meetings. They’re also processing the mail.

But the Office of Inspector General recently said there’s still a big backlog of mail and other paper to be processed.

More importantly, I’ve documented in the past the high rate of errors committed by Social Security employees whether in person or over the telephone.

That’s why I have long recommended that you file applications for benefits online after establishing a “mySocial Security” account at www.socialsecurity.gov.

Any other actions you need to take regarding your benefits also should be taken through the website. You’re also more likely to find correct answers to your questions on the website than over the telephone or through an office visit.

You also can spot fraud early. Checking the account regularly tells you if someone applied for benefits under your earnings record, tried to redirect your benefits to a different bank account, or took other actions.

Lessons from John Hancock’s Long-Term Care Insurance Settlement

John Hancock Life Insurance recently agreed to pay $26.3 million to the New York State Partnership for Long-Term Care in settlement of a dispute over how Hancock calculated benefits for some of its long-term care insurance (LTCI) policyholders.

Hancock was one of the leading issuers of LTCI until it stopped selling new individual policies in 2016. It continues to administer policies that are in force.

New York accused Hancock of miscalculating the benefits due policyholders. The state said that when a policyholder didn’t use the full daily benefit amount, the unused amount was supposed to be rolled over to be available in the future. Hancock failed to roll over the unused benefits.

One lesson from this case is that you can’t always depend on the insurance company to properly interpret a policy and administer it. This is particularly true for policies issued before 2010.

In 2010, a standardized policy was issued that most insurers now use. But before that, insurers wrote their own policies, and the terms of the policies differed from insurer to insurer and even between policies issued by the same insurer in different years.

You need to understand the terms of your policy. The details should be in an easy-to-understand form in the policy’s Explanation of Benefits.

More importantly, you need someone who’s capable of understanding the policy and ensuring you receive the full benefits should the time come when you need long-term care and can’t deal with the insurer yourself.

It’s fairly unusual for an insured to exhaust the benefits under a policy. Industry estimates are that only about 20% of LTCI policyholders exhaust their benefits. But in case you reach that point, you need an advocate who knows your policy and can work with the insurer.

The Data

Home prices increased 0.33% in June, according to the S&P Corelogic Case-Shiller Home Price Index. That’s the lowest monthly increase since June 2020. Over 12 months, the index is up 18.0%.

The FHFA House Price Index showed a similar trend, increasing only 0.1% in June (after increasing 1.3% in May) and 16.2% over 12 months.

Personal income increased by 0.2% in July, which was down from June’s 0.7% increase.

Households throttled back on spending. Personal consumption expenditures increased only 0.1% in July after rising 1.0% in June. The spending number isn’t adjusted for price changes, so falling gas prices were a factor in July’s lower spending.

Consumer Sentiment, as measured by the University of Michigan, increased in August to 58.2. In mid-August, the preliminary reading was 55.1. At the end of July, it was 51.5.

Expectations that inflation would increase were at their lowest level in eight months. That improved overall expectations for the economy and for household finances.

Consumer Confidence, as measured by The Conference Board, increased to 103.2 in August from 95.3 in July. That’s the first increase in four months. Consumers were more positive about trends in the economy and inflation.

The Kansas City Fed Manufacturing Index was 3 in August. That’s down from 13 in July but still indicates the sector is expanding.

The general business activity index derived from the Dallas Fed Manufacturing Survey’s improved to negative 12.9 in August from negative 22.6 in July. Despite the improvement, the negative number still indicates activity is contracting.

The production index, which measures manufacturing activity in the state, fell to 1.2 in August from 3.8 in July. The August number indicates the manufacturing sector is expanding but at a slower rate.

The second estimate of gross domestic product (GDP) for the second quarter showed a slight improvement from the first estimate. GDP was estimated to have declined at a 0.6% annual rate. The first estimate pegged the decrease at 0.9%.

Personal consumption expenditures were estimated to increase at a 1.5% annual rate in the second estimate, up from 1.0% in the first estimate.

The Fed’s preferred inflation measure, the Personal Consumption Expenditure (PCE) Price Index, declined in July by 0.1%. Over 12 months, the index is up 6.3%. That’s lower than the 6.8% 12-month increase recorded in June, which was the highest rate since January 1982.

Excluding food and energy, the core PCE Price Index increased 0.1% in July, compared to a 0.6% increase in June. Over 12 months, the core PCE Price Index increased 4.6% in July, down from 4.8% in June.

Job openings remained around 11.2 million in July, according to the Job Openings and Labor Turnover Survey (JOLTS) report. Hirings, discharges, and quits also didn’t change much from June to July.

New unemployment claims declined by 2,000 in the latest week to 243,000.

Continuing claims decreased to 1.415 million from 1.434 million the previous week.

The ADP Employment Report said 132,000 private sector jobs were created in August. The report wasn’t issued for the last two months so the methodology could be reworked. The report had differed significantly from the monthly Department of Labor employment reports for some time.

The report also said 270,000 jobs were created in July and 380,000 in June.

The Markets

The S&P 500 fell 3.43% for the week ended with Tuesday’s close. The Dow Jones Industrial Average lost 3.36%. The Russell 2000 retreated 3.32%. The All-Country World Index (excluding U.S. stocks) dipped 2.11%. Emerging market equities decreased 1.18%.

Long-term treasuries rose 0.82% for the week. Investment-grade bonds fell 0.49%. Treasury Inflation-Protected Securities (TIPS) lost 0.42%. High-yield bonds declined 1.74%.

In the currency arena, the U.S. dollar rose 0.28%.

Energy-based commodities dipped 1.17%. Broader-based commodities fell 1.13%. Gold declined 1.42%.

Bob’s News & Updates

My next book will be “Retirement Watch: The Essential Guide to Retiring in the 2020s.” The official publication date is Jan. 3, 2023. You can make a pre-publication order or learn more about the book by clicking here and here, respectively.

My latest book is “Where’s My Money: Secrets to Getting the Most out of Your Social Security.” It has received mostly five-star reviews on Amazon for telling you clearly what your benefit options are in different situations and how to determine the best choice for you. You can find it on Amazon.com or Regnery.com.

The number of regular viewers for my Retirement Watch Spotlight Series continues to increase. You should sign up because I make in-depth presentations of key retirement finance topics. You can watch these online seminars from the comfort of your home or office at times you choose. To learn more about my new Spotlight Series, click here.

A recent five-star review of my book, “The New Rules of Retirement” on Amazon.com said, “A complete retirement guide! One of the best books on this topic!” Click for more details about the revised edition of “The New Rules of Retirement.”

If you’re interested in my books, check my Amazon.com author’s page.

I’m a senior contributor to the Forbes.com blog. You can view my contributor page here.