Jewish World Review May 25, 2000 /20 Iyar, 5760
CDs for security, not investment
DEAR BRUCE: In your column you continually say that mutual funds are much better than CDs, but isn't there a brokerage fee or percentage rate connected with these investments? I am not a savvy investor -- that's why I like my $10,000 CD, even though the return is very small. -- J.T., Las Vegas
DEAR J.T.: If you are satisfied with the very tiny return that the CD offers you in return for the security, so be it. However, there are mutual funds that you can purchase that are no-load, meaning no commission, although you will have to seek them out.
Why do you object to paying a small commission if your overall net return can be two or three times the return that you are receiving in the CDs? Granted, there are different levels of tolerance for risk, but it seems to me that most of us can afford to take some risk for a substantially higher return on our investment. CDs barely outpace inflation.
DEAR BRUCE: I wish I could tell you that I was a little old lady who didn't know any better, but I am a reasonably savvy adult woman who was too blind to see what my adult son was doing. Twice in the past year he has applied for credit cards in my name, using my Social Security number. He ran up the charges and then stopped making payments.
The first time it was such a shock that I borrowed money to pay off the $10,000 credit-card debt. Now just a few months later I have received another call about another large outstanding balance. My current husband advised me to ignore the calls.
I have contacted an attorney, and I have told my son that I will not pay these bills. I am concerned about my credit. Is there any way that I can assure that this doesn't happen again? -- G.J., e-mail
DEAR G.J.: To answer your last question first, I don't know how anyone can completely protect themselves from this type of abuse. Part of the problem is the proclivity for many credit-card companies to issue cards with only a cursory examination of the applicant. Having said that, simply advise the credit-card carrier that you will sign an affidavit of fraud and hold them civilly liable for any adverse credit information that may appear in your credit file, since none of this was any of your doing.
I am sorry your son is such a deadbeat.
DEAR BRUCE: I am a pizza-franchise owner, and I wish to expand my business. I found an awesome site in an adjacent community, but the problem is that it was a gas station for over 30 years.
The state fire marshal's office does not require the tanks to be moved because they have not been in operation for many years, and because the tanks are not a regulated entity, the EPA does not require the tanks to be cleaned up unless they pose a health threat.
My attorney prepared a purchase agreement with indemnification language relating to environmental issues. I have tried to get environmental insurance without success. Could I form a corporation that would own the land and building, or just the land, and then lease the property to my pizza corporation? Would this protect me? -- T.S., e-mail
DEAR T.S.: You are savvy to recognize the environmental concerns. Since the tanks were not used for over 30 years, the likelihood is that any possible pollution problem has been dissipated. Having said that, there is no way that I would ever want that property to be in my name.
Your attorney is the guy who has to answer the question about putting the property in a separate corporation with the land, not the building, as the only asset. The building would then be owned by another corporation, which would lease to you.
In the absence of insurance, I would be a bit nervous. You might wish to dig a hole and view the tanks to see if there is any obvious evidence of pollution. The difficulty with pollution problems is that, in most cases, there is no statute of limitations. Whoever has the deepest pockets in the ownership chain is going to be zapped if a problem arises, and the indemnification language in your contract may have little value unless the corporation or person offering these indemnifications is a substantial citizen.
This is strictly a matter of finding a legal way to distance yourself through one or two corporations from any potential liability. If I could not be persuaded that this could be done, I would take a bye, even though the location is, in your words,
Send your questions to JWR contributor Bruce Williams by clicking here. (Questions of general interest will be answered in future columns. Owing to the volume of mail, personal replies cannot be provided.) Interested in buying or selling a house? Let Bruce Williams' "House Smart" be your guide. (Sales of the book help fund JWR).
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