Is the Collapse of the Dollar Eminent?

Reader Question:  I have about $100,000 in a 401K through my former employer and I’m thinking about taking either some or all of the money out.  I would like to put it in some type of investment or CD that would allow me access to it fairly quickly and is fairly safe.  I’m also concerned about the International Dollar Standard that is taking place in October of this year. What kind of concern do I need to have about my investment and money in the bank when the International Dollar Standard occurs?  I’m retired; age 67 and we own our home and are debt free.

Answer:  First, congratulations on being debt free!  That is one of the major goals we have for each of our clients.  When moving money out of your 401k be sure to roll the funds over into an IRA to avoid immediate income taxes.  If you want to avoid stock market risks, all of your fixed income choices (CDs, money market, short-term high quality bonds) will offer only very modest returns.  The good news is that you will have fairly quick and easy access to your money.  I’d recommend rolling to a discount broker such as Charles Schwab, Vanguard or Fidelity.

Regarding the change to the International Dollar Standard…scare mongers are writing a lot about the collapse of the dollar based on the International Monetary Fund’s October 20th meeting this year.  The story is that China will move in and replace the U.S. Dollar as the world reserve currency causing the apocalyptical collapse of the dollar and our way of life.  It’s true that China is pushing to have their currency officially included in the basket of world reserve currencies  (called Special Drawing Rights or SDRs) managed by the IMF but I suspect the impact will be minimal.  If you’ve ever traveled outside the United States, you quickly realize that there is no place like America.  I assure you, if there is a global financial crisis, the world will look to the U.S. Dollar as the safe haven of choice.

Reader Question:  Any advice for five siblings (all in our 60’s and 70’s) who own a river front lot in south Alabama, with 14 children between them? We want to figure out the best way to leave the property to them with possible buy-outs from some of them. Many of them live across country and will not be able to use it often. Some are better able to buy out than others.

Answer:  It’s not unusual for family members to have the desire to keep the ‘family land’ intact for future generations to enjoy.  I suspect this land was originally owned by your parents or perhaps their parents before them.  Once land is passed through a couple of generations, it often becomes a challenge to keep the ‘happy’ in the land because of cross-purposes of the cousins.  Some have no interest in the land, others love it and use it often and everyone’s ability to fund it varies.  The first thing I would consider is placing the land in a limited liability company (LLC).  The LLC will provide some liability protection and make it easier to transfer the various owners’ interests in and out of the property.  The most successful of these types of transfers include both a transfer of the land and enough cash that can be invested to fund the upkeep and expenses along with at least partially funding a potential buy-out or two.  In many cases, the best option is to either sell the property or determine which child or children want the land and make arrangements for them to receive it while the disinterested children receive something of equal value from your estates.

Reader Question:  You recently wrote about the perils of being on the board of directors of a corporation.  Does the same liability you speak of apply to people who are board members of a company that is operated as a partnership? Should my business partners and I have Directors Liability Coverage?

Answer:  Depending on the type of partnership, your level of personal liability when operating as a partner in a partnership may very well be higher than if you operated as a corporation.  In a general partnership, you can be held liable for acts of another partner even if you didn’t authorize the action or even if you were not aware of the action taken.  Your first line of defense here is to choose your partners very carefully.  You’ll also want to have legal agreements drawn that outline restrictions related to partner activities as well as remedies for violations such as hold-harmless clauses.  You’ll also want to have your property and casualty insurance agent review the best options for liability insurance.  Because of the many potential pitfalls of general partnerships, most folks now opt for operating under an S-corporation, C-corporation (typically large businesses such as public corporations), or a limited liability company (LLC).