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Money advice: Finding trustworthy financial advisors

Also: Debt settlement shouldn't be the first choice for credit card debtor, and retirees can still receive Social Security checks if they move abroad.

August 01, 2010|Liz Pulliam Weston | Money Talk

Dear Liz: It looks like my mother is going to win a lawsuit that could bring her more than $2 million. Can you advise us what steps to take once she receives her money? She wants me to play a major part in her finances as she is not a native English speaker, but I do not know much about finance, either. I can probably look for a financial advisor, but how do I know we are not going to bump into another Bernie Madoff?

Answer: Your mom needs at least three advisors to handle such a big windfall: a financial planner, an accountant and an estate-planning attorney.

You can get referrals for fee-only financial planners — who are compensated only by fees their clients pay and not by commissions or kickbacks — from the National Assn. of Personal Financial Advisors at http://www.napfa.org or the Garrett Planning Network at http://www.garrettplanningnetwork.com. You should interview at least three prospects about their education, ethical commitment and experience advising people who acquire sudden wealth. Check out their backgrounds using the BrokerCheck feature at the Financial Industry Regulatory Authority website (FINRA.org).

Garrett advisors typically charge by the hour and often don't manage assets — the client makes the actual investments. NAPFA advisors typically do offer asset management and may charge a percentage of assets.

One way to reduce the chances of becoming a Ponzi scheme victim is to make sure your money is held by an independent financial institution such as a bank, brokerage or mutual fund and that your statements come from that institution. You also should find out who audits your advisor and do a background check on that company as well.

Before turning to debt settlement …

Dear Liz: My wife and I are in our 30s and want to start a family. The issue is that I am a commercial real estate broker and we are not sure when things will turn around. I have stabilized my income, but it is now going toward paying the many credit cards we used when things were tight. We have given up any extravagances we once enjoyed, but it seems like everything we make goes right out the door. Can you tell us about debt settlement? How can we decide whether that is a good option for us?

Answer: When you're struggling with credit card debt, you'd be wise to make two appointments: one with a legitimate credit counselor (you can get referrals from the National Foundation for Credit Counseling at http://www.nfcc.org) and one with a bankruptcy attorney.

The credit counselor can determine whether you can pay off your credit card debt within five years and avoid bankruptcy. The attorney can advise you about your eligibility for bankruptcy and your other options.

If neither credit counseling nor a Chapter 7 liquidation bankruptcy is a good fit for you, debt settlement can make sense.

You don't, however, have to pay some debt settlement company a big upfront fee to negotiate for you. It is possible to negotiate debt settlements on your own, particularly if you can pay with lump sums of cash. For more on debt relief options, visit debt expert Gerri Detweiler's site DebtCollectionAnswers.com.

Social Security for retirees abroad

Dear Liz: I have been reading about people retiring overseas so they can live better on less money. But if you retire overseas, don't you stop getting Social Security? If not, how does that work at tax time?

Answer: If you earn your benefits here, you can receive them pretty much anywhere you want, said Kathleen Peddicord, author of "How to Retire Overseas: Everything You Need to Know to Live Well (for Less) Abroad."

The Social Security Administration sends more than half a million checks every month to recipients in other countries. You also have the option of having your Social Security check deposited in a U.S. bank account that you can access anywhere in the world with an ATM card.

But no matter where you go, if you're a U.S. citizen you'll have to file a U.S. tax return, and you'll probably have to file a return with your host country as well. Make sure you get solid tax advice before making the move.

Liz Pulliam Weston is the author of the book "Your Credit Score: Your Money and What's at Stake." Questions for possible inclusion in her column may be sent to 3940 Laurel Canyon., No. 238, Studio City, CA 91604, or via the "Contact Liz" form at http://www.asklizweston.com. Distributed by No More Red Inc.

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