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Using the Internet as Your Financial Planner

The Internet is a great thing. You can probably find any piece of information you want somewhere out there. It is only a matter of asking the right question. My mother thinks I look everything up on the Internet.

However, along with great information available on the worldwide web, there is a lot of misinformation. Some things are just plain wrong and some are very misleading. The Internet is no substitute for expert financial and retirement planning advice - as a recent bankruptcy court case proves.

Mom is 71, still working, and has $200,000 inherited from her husband. She relied on her husband and her daughter for financial advice. In an effort to protect her assets, Mom transferred the $200,000 to a Merrill Lynch account in the name of her daughter.

Then the stock market started to drop and the account was losing value. In an attempt to further protect Mom’s assets, the Daughter did an Internet search and came up with information on the Ultra Trust.

The Ultra Trust was sold as a financial instrument to “avoid creditor claims of fraudulent conveyance and civil conspiracy to divest yourself of valuable assets.” Mom and Daughter transferred the Merrill Lynch assets into the trust and Mom also transferred ownership of her home to the trust.

Then the real estate bubble burst and Daughter found herself in financial difficulties, which lead to her declaring bankruptcy. The Ultra Trust became a disputed asset of the bankruptcy.

To make a long story short, Mom and Daughter claimed that the assets of the trust were Mom’s but the court found that what was left of Mom’s $200,000 had become an asset of Daughter’s at the time of the transfer of the funds to the Merrill Lynch account. The Court also found that the Ultra Trust was not so Ultra and the balance of “Mom’s” funds would be included in Daughter’s assets in the bankruptcy proceedings.

In this case, Mom in Arizona and Daughter in Virginia met up, through the Internet, with a non-attorney financial planner in Massachusetts to implement an estate plan to protect Mom’s assets. Daughter “bought” an Ultra Trust through the Internet. She used the attorney recommended by the planner to draft the trust. There was no independent review of any of the strategies or documents by any independent professional.

When it comes to the tax code, any planning is incredibly complicated. To protect yourself, your loved ones, and your assets, you really need to consult with a competent advisor - a financial planner, attorney, and/or CPA. In many cases you need a specialist, an elder law attorney or a retirement specialist. Do-it-yourselfers oftentimes end up in incredible messes that do not accomplish their goals and that end up costing them a lot of money.

Article Highlights:

  • The Internet is a fascinating, informative, yet dangerous substitute for sound financial advice (re: Woodworth - Bankruptcy Court)
  • Mom (age 71) wanted to protect her assets
  • The Daughter made some unwise moves that cost her Mom  her nest egg
- By Beverly DeVeny and Jared Trexler


That is so sad! Hope others will heed your words of wisdom as the internet definitely cannot replace sound financial advice from a professional.

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You recently said that a 401(k) distribution would add to your MAGI (modified adjusted gross income) for the purpose of determining if you are subject to the 3.8% healthcare surtax. What about Roth IRA distributions? Would they also count towards your total MAGI income for surtax purposes?


IRA distributions are exempt from the 3.8% surtax, but taxable distributions from IRAs can push income over the threshold amount, causing other investment income to be subject to the surtax. Because Roth IRA distributions are generally tax-free, they don’t count towards your total MAGI.