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Estate Planning as a Family Conversation: Guiding Aging Parents

Fri, 12 Jul 2024 14:49:36 GMT

Involve Your Family in Estate Planning to Ensure Everyone's Wishes Are Honored and Future Conflicts Are Avoided

Discussing estate planning within families is essential, especially as parents age. These conversations ensure that everyone's wishes and needs are considered and respected. Starting these discussions early can prevent future conflicts and provide peace of mind for the entire family. Involving adult children in these conversations is crucial to maintaining an up-to-date and comprehensive estate plan.

The Need for Involvement

Involving adult children in their parents' estate planning process is crucial. As parents age, their health and financial situations can change, necessitating updates to their estate plans. Adult children can help ensure that these plans reflect current circumstances and wishes. Additionally, having these discussions early can help avoid the pitfalls of probate, which can be time-consuming, costly, and stressful.

Understanding Probate and Its Implications

Probate is the legal process through which a deceased person’s estate is managed and distributed. If aging parents don't have the proper documents in place, their estate will go into probate when they pass away. This can lead to several issues:

● Lengthy Delays: Probate can take months or even years to complete, delaying the distribution of assets.

● High Costs: Legal fees and court costs can significantly reduce the value of the estate.

● Lack of Privacy: Probate proceedings are public, which means anyone can access details about the estate.

By ensuring that proper estate planning documents are in place, families can avoid probate and its associated challenges.

Preparing for the Conversation

Approaching the topic of estate planning with aging parents requires sensitivity and respect. Here are some tips to help:

● Choose the Right Time and Place: Set a calm, private setting and choose a time when all parties are most likely to be relaxed and receptive.

● Be Patient and Understanding: Recognize that this can be a difficult subject for parents to discuss.

● Frame It Positively: Emphasize that planning now can prevent stress and confusion later.

Strategies for Effective Communication

To ensure clear and effective communication during estate planning discussions:

● Encourage Openness: Allow parents to express their wishes without feeling pressured or overwhelmed.

● Involve All Relevant Family Members: Ensure that all siblings or relevant family members are present to avoid misunderstandings or conflicts later.

● Listen Actively: Show that you value and respect your parents' wishes.

Key Topics to Cover

When discussing estate planning with aging parents, it's important to review:

● Wills and Trusts: Ensure that these documents reflect current wishes and circumstances. Trusts, in particular, can help avoid probate and provide specific instructions for asset distribution.

● Health Care Directives: Discuss living wills and medical powers of attorney to ensure parents' healthcare wishes are honored.

● Powers of Attorney: Determine who will handle financial and legal matters if parents become incapacitated.

● Executors and Health Care Proxies: Ensure the chosen individuals are prepared and willing to take on these responsibilities.

Legal and Financial Considerations

Consulting with legal and financial professionals is essential to ensure that all aspects of the estate plan are legally binding and financially sound. Regular reviews of the estate plan, especially following major life events or changes in the law, are recommended. This proactive approach helps keep the plan current and effective.

Peace Of Mind For The Entire Family

Making estate planning a family conversation ensures that everyone's wishes are honored and helps prevent future conflicts. Approach these discussions with love, care, and a mutual desire to respect each other's wishes. A well-prepared estate plan not only avoids the complications of probate but also provides peace of mind for the entire family.

Ready to start the conversation about estate planning with your family? Contact Gegan Law Office to schedule a consultation and get expert guidance on creating a comprehensive and respectful estate plan. Set up your consultation today.

By involving family members and approaching the conversation with sensitivity and respect, you can ensure that your parents' wishes are honored and provide peace of mind for everyone involved. Proper estate planning is a lasting gift to your loved ones, sparing them the difficulties of probate and ensuring that their legacy is managed according to their wishes.

Understanding Joint Ownership: Pros and Cons in Estate Planning

Thu, 20 Jun 2024 17:47:38 GMT

Key Considerations for Joint Ownership in Florida’s Legal Landscape

Joint ownership of property is a common, but misunderstood strategy in estate planning, especially for assets that appreciate like real estate or other investments. While it offers significant benefits such as avoiding probate, joint ownership comes with complexities that can impact long-term estate intentions and it can create capital gains tax bombs that might have been avoided simply by using other estate planning techniques. Understanding these nuances is crucial for any property owner considering this approach.

The Benefits of Joint Ownership

One of the primary advantages of joint ownership with rights of survivorship is the ability to bypass the probate process. In Florida, when one co-owner dies, the property automatically passes to the surviving co-owner(s) without the need for probate. This right of survivorship is particularly appealing for those looking to simplify the transfer of assets and ensure immediate accessibility to the surviving party. This kind of joint ownership is different from “tenants in common” which allows each owner to own a specific percentage of the property - which they can transfer or bequeath to a third party if they wish.

Potential Drawbacks

However, joint ownership doesn't always align with long-term estate planning goals. Complications can arise if the co-owners are not your intended beneficiaries of your estate. For instance, if a property owner adds a business partner as a joint owner, the partner will receive full ownership upon the owner’s death, bypassing the decedent's family or other intended beneficiaries the original owner might have intended to benefit. This outcome could lead to unintended and sometimes troubling consequences and disputes. It can also lead to unequal division of an estate. An owner might jointly own an asset worth $10,000 with one child and direct another asset worth $10,000 go to another child through a Last Will. However, upon death the values of those assets might have gone in different directions, or have different management responsibilities. For example, it’s easier to manage a bank account worth $10,000 than a business or real estate investment worth $10,000.

The Potential for Creating a Capital Gains Tax Bomb

When an investor buys an asset for one price and then later sells it for a higher price, that creates a Capital Gain, which is taxed at a special capital gains tax rate. When a joint owner receives an asset through the death of the other joint owner, and then sells the asset - the IRS will expect payment of a capital gains tax, even if the new owner was not the one to originally buy the asset.

However, one who receives an asset through inheritance (through a Last Will, or a Living Trust, or even through intestacy), gets a special benefit - they are treated as if they bought the asset for whatever it’s value was on the date of death (called a “step up in Capital Gains Tax basis). So, if you sell an asset you inherit soon after the death of the prior owner, you generally owe little to no capital gains tax (since there is normally little capital gain from the date of death to the date of sale). For an asset that has appreciated quite a lot, like real estate or other investments, this can result in dramatic tax savings.

For example, if a real estate investment was purchased for $100,000 but upon the date of death of the owner, it was worth $500,000, that results in a capital gain of $400,000. A beneficiary of that asset through a Last Will can now sell that asset for its full market value of $400,000 but pay zero capital gains tax, as there was no “gain”. The one who received that same asset through joint ownership would owe a capital gains tax. At a long term capital gains tax of 15%, the sale of that same asset would create a $60,000 capital gains tax (15% on the $400,000 gain).

Considerations for Estate Planning in Florida

Rights through joint ownership take precedence over anything a decedent may say in a Will or a Living Trust. So, if a parent owned a bank account with $100,000 in it jointly with their daughter, but in their Last Will said the same bank account should go to their son, the Will is ineffective. The daughter will receive the bank account, even though the decedent expressed something different. A Will cannot direct property held in joint tenancy if one of the owners dies, as it does not form part of the deceased’s estate. Such constraints might conflict with the owner’s desire to distribute assets in a certain way, highlighting the need for careful planning and consultation.

Alternatives to Joint Ownership

For property owners concerned about the complications of joint ownership, there are viable alternatives:

Tenancy in Common: This arrangement allows owners to pass their share of the property to a beneficiary of their choice through their will, thus providing greater flexibility. For example, two business owners who jointly own the business can leave their 50% share of the business to their families.
Last Wills or Living Trusts: Establishing a Will or Living Trust offers even more control and flexibility. The Will or Trust maker can specify how assets should be handled and distributed after their death, aligning with specific goals and family dynamics, even exerting some control over the asset after death (for example, by keeping the asset in trust until beneficiaries get old enough to manage it).

Advanced Planning Strategies

Implementing advanced planning strategies can further safeguard an estate. For example, a trust can include detailed stipulations for the use of funds, such as educational expenses, startup capital for a business, or down payments on a first home. A trust for beneficiaries can also include incentive provisions that incentivize beneficiaries to accomplish various things (ex. Early distributions if a beneficiary graduates College with a certain grade point average or above). These stipulations can ensure that the trust maker’s values and wishes continue to influence the beneficiaries’ choices and lifestyles.

Consulting Legal Professionals

Joint ownership can be a powerful tool in estate planning but requires thoughtful consideration to align with your overall estate goals. Consulting with an estate planning attorney, such as those at Gegan Law Office, can help navigate these decisions, ensuring that your assets are protected and distributed according to your wishes within Florida's legal framework.

By understanding the full implications of joint ownership and considering alternative arrangements, property owners can make informed decisions that reflect their values and planning objectives, ultimately protecting and benefiting their loved ones in the long term.

If you're unsure how joint ownership will impact your estate, contact Gegan Law Office today . Let us help you craft a plan that meets all your estate planning needs.

How Well-Designed Trusts Can Pass On Your Values, Not Just Your Valuables

Wed, 22 May 2024 20:04:57 GMT

Crafting a Legacy Through Thoughtful Trust Planning

Imagine if your children were to inherit everything you own the moment they turn 18. What decisions might they make? Are they prepared to handle such responsibility? This is where a well-designed trust comes into play, offering not just a transfer of wealth, but a foundation of values and guidance for their future decisions.

The Purpose of Trusts in Estate Planning

Trusts are powerful tools in estate planning, designed to manage and control the distribution of your estate through specific conditions tailored to your family's needs. By setting up a trust, you maintain control over who manages the money, how it is used, and when and under what circumstances your children gain control over their inheritance.

Incentivizing Positive Decisions

Trusts can be incredibly flexible and customizable. They allow you to incentivize your children to make wise decisions, achieve personal milestones, and follow paths that you value. Whether it's pursuing higher education, starting a business, or buying a home, a trust can provide financial support and rewards at key moments. For instance, you might set conditions in the trust that disburse funds when your child graduates from college, marries, or even when they pursue a career in a field you respect such as the military or public service.

Safeguarding Your Children’s Future

For children who may face personal challenges, such as addiction, a trust can be a lifeline. Instead of an outright inheritance that could potentially be misused, a trust can stipulate that funds be used only for rehabilitation and recovery, with further distributions contingent upon maintaining sobriety. This method ensures that your legacy contributes positively to their well-being, supporting them in overcoming their challenges.

Flexible Age Considerations and Staged Distributions

A trust can specify ages older than 18 for gaining partial or full control over inherited assets, allowing your children to mature and learn financial responsibility over time. This staged approach helps mitigate the risk of financial mismanagement, giving them the opportunity to learn from smaller mistakes without jeopardizing the bulk of their inheritance.

Protection From External Threats

Trusts also protect your children’s inheritance from external risks, such as creditors, divorce settlements, or lawsuits. By keeping the assets within a trust, you ensure that what you’ve worked hard to build is protected from such dangers and threats.

Empowering Your Legacy: More Than Just Wealth Transfer

A trust does more than pass on your wealth—it can pass on your values, helping shape the lives of your beneficiaries according to the principles and ethics you hold dear. It’s an act of love that extends beyond your lifetime, offering guidance and support when you are not there to provide it yourself.

Don't leave your family's future to chance. Let us help you craft a trust that embodies your values and secures your legacy. Contact Gegan Law Office today to explore how we can tailor a trust that fits your unique family dynamics and goals.

If you're ready to see how a trust can be structured to reflect your values and protect your family, contact Gegan Law Office today . Let us help you craft a plan that meets all your estate planning needs.

How to Get Estate Planning Off Your To-Do List

Wed, 17 Apr 2024 15:27:28 GMT

Stop saying “we really need a Will!” and start making your plan in a few simple steps.

“We Really Need to Make a Will…”

Estate planning is something we know we need to do, yet often push aside. Whether you're empty nesters, part of a young, growing family or navigating the complexities of a blended household, the peace of mind that comes with having your affairs in order is unmatched. However, actually getting started may feel overwhelming for many families. Let's simplify the process together.

Creating Your Estate Plan is an Act of Love

At its core, estate planning is an act of love. It's ensuring your family's future is secure, no matter what tomorrow brings. For young families, it's about safeguarding your children's future. In blended families, it’s even more crucial to clarify intentions to ensure everyone you love is taken care of. And for those traditional families who are enjoying their empty nesting or retirement years, you want to relieve your family of the burdens of probate costs and delays and unnecessary taxes.

Step 1: List Your Assets

First, know what you have. From your home to sentimental items, understanding your estate's scope is foundational. For blended families, this step helps ensure no one is overlooked or accidentally disinherited.

Step 2: Think Family

Who will look after your children if needed? Estate planning allows you to make these decisions thoughtfully, offering security in knowing they'll be cared for as you wish.

Step 3: Explore Your Tools

Wills, trusts, and powers of attorney aren't just legal documents; they're your voice when you can't speak. They provide a framework to protect your loved ones from unforeseen challenges.

Step 4: Professional Guidance Is Key

Navigating estate planning alone can be daunting. That's where we come in. Our team has a lot of experience creating plans tailored to the unique needs of all families, especially those that are blended. Make an appointment now so you know you’ve got this off your “to-do” list, and on your “getting it done” list.

Taking Action

Today is the best day to start. With our guidance, estate planning becomes less about paperwork and more about taking control of your family's future. It's not just checking a task off your list; it's an ongoing commitment to your loved ones' well-being.

Remember, great planning isn't about anticipating every turn life might take. It's about ensuring that no matter what paths you and your family find yourselves on, you're prepared.

Let Us Help

For families of all shapes and sizes, estate planning is a profound way to show your love. Let's take this important step together. Contact Gegan Law Office to begin.

The Art of Being a Successful Snowbird

Mon, 09 Dec 2019 16:00:00 GMT

“In the next few months, thousands of northerners — so-called “snowbirds” — will escape their snowy, cold climates to spend the winter in warm, sunny spots in the southern or western part of the United States.”

The interstates get busy in September, when retirees take to the highways to leave the north behind and head to their southern or southwestern homes, reports Next Avenue in “7 Tips for Being a Successful Snowbird.” Some snowbirds have a more enjoyable experience than others, in part because of their preparation.

Here are a few lessons from the experienced snowbirds:

Choose a location that suits you . Don’t confuse a cold-weather home with a vacation spot. You’ll be living your daily life here. Therefore, you want to find the activities that you enjoy on a regular basis. If your regular life at home is busy and you like it that way, moving to a laid-back beach town or an isolated cabin in the woods may not be a good fit for more than a few days.

Look before you leap . Rent a place for a month or two, before committing to spending an entire winter there. You can’t know if you love a place before you live there for an extended period of time. If you’re not happy, you can try someplace else. Once you find the right spot, book the whole winter. Book the whole next winter as well. Good spots go fast.

Switch bills to be paid online. Before everything was online, it was tricky to take care of your home bills while living somewhere else. Make all your bills payable online or put them on autopay. If your bank doesn’t have a branch nearby, open an account in a nearby bank and link with your home bank, so you can easily move money between accounts.

Make new friends and new connections. One of the adjustments of snowbird life is leaving family and friends back up north. If you are in a community with lots of snowbirds, they are likely to be in the same position as you. Introduce yourself, join clubs and get active.

Don’t overbook your time with guests . You may love having friends come down, but being a frequent host takes a lot of time and energy. Don’t turn your winter residence into a bed and breakfast. Don’t be afraid to limit the number of nights for your houseguests. This is your home, not a hotel.

Make it a second home if you own it. If you buy rather than rent, it’s easier to keep some things there. Therefore, you are not lugging quite as much back and forth. However, even in a rental, you may be able to store some items, or rent a small storage unit nearby. Doing so will make travelling easier, and your snowbird nest will feel more like home.

Enjoy the ride back and forth. There’s no need to rush, if you’re going to be staying for a few months. If you’ve always travelled by interstate, maybe a side trip along local roads will break up the monotony and create some new memories. Stop by to visit with relatives along the way, or the national park that you’ve been meaning to experience. Make the ride an enjoyable part of your journey.

Reference: Next Avenue (Sep. 13, 2019) “7 Tips for Being a Successful Snowbird .”

Do Name Changes Need to be Reflected in Estate Planning Documents?

Wed, 27 Nov 2019 16:20:00 GMT

“The fact is people’s names often change. People get married and divorced or sometimes just legally change their names.”

When names change, executing documents with the person’s prior name can become problematic. For example, what about a daughter who was named as a health care representative by her parents several years ago, who marries and changes her name? Then, to make matters more complicated, add the fact that the couple’s daughter-in-law has the same first name, but a different middle name. That’s the situation presented in the article “Estate Planning: Name changes and the estate plan” from nwi.com.

When a person’s name changes, many documents need to be changed, including items like driver’s licenses, passports, insurance policies, etc. The change of a name isn’t just about the person who created the estate plan but also to their executors, heirs, beneficiaries and those who have been named with certain legal powers through power of attorney (POA) and health care power of attorney.

It’s not an unusual situation, but it does have to be addressed. It’s pretty common to include additional identifiers in the documents. For example, let’s say the will says I leave my house to my daughter Samantha Roberts. If Samantha gets married and changes her last name, it can be reasonably assumed that she can be identified. In some cases, the document may be able to stay the same.

In other instances, the difference will be incorporated through the use of the acronym AKA—Also Known As. That is used when a person’s name is different for some reason. If the deed to a home says Mary Green, but the person’s real name is Mary G. Jones, the term used will be Mary Green A/K/A Mary G. Jones.

Sometimes when a person’s name has changed completely, another acronym is use: N/K/A, or Now Known As. For example, if Jessica A. Gordon marries or divorces and changes her name to Jessica A. Jones, the phrase Jessica A. Gordon N/K/A Jessica A. Jones would be used.

However, in the situation noted above, most attorneys to want to have the documents changed to reflect the name change. First, there are two people in the family with similar names. It is possible that someone could claim that the person wished to name the other person. It may not be a strong case, but challenges have been made over smaller matters.

Second is that the document being discussed is a healthcare designation. Usually when a health care power of attorney form is being used, it’s in an emergency. Would a doctor make a daughter prove that she is who she says she is? It seems unlikely, but the risk of something like that happening is too great. It is much easier to simply have the document updated.

In most matters, when there is a name change, it’s not a big deal. However, in estate planning documents, where there are risks about being able to make decisions in a timely manner or to mitigate the possibility of an estate challenge, a name change to update documents is an ounce of prevention worth a pound of trouble in the future.

Reference: nwi.com (October 20, 2019) “Estate Planning: Name changes and the estate plan”

Basic Financial Planning Strategies for Parents

Wed, 20 Nov 2019 21:57:00 GMT

Even if you have taken good care of your finances over the years, adding a child to the family can change your financial situation significantly. This is why experts recommend parents begin planning for their financial security as soon as possible. Here are a few tips for parents on how to get started with financial planning.

Plan for Your Future by Estimating Your Net Worth

Now that you’ve added to your family, proper financial planning includes planning for your child’s future as well as your own. Recent data suggests the average total cost of raising a child is around $204,000, adjusted for inflation. So, before taking action blindly, it is useful to calculate your current financial situation. Will you or your partner work less to take care of your child? Will you need to hire a babysitter or nanny?

Add these estimations to a column with other regular costs, like student loans, taxes, and insurance premiums -- the sum of these numbers is your total liability. Next, find your total assets by adding together your savings, retirement accounts, and the potential payout from your life insurance policy. You’ll also need to figure out your home’s worth (you can look at comparable properties in your neighborhood and adjust based on the amenities your house offers), then add it into your asset column. Finally, subtract your total liabilities from your total assets to find your estimated net worth.

Save for Your Child’s Future

Once you have established your net worth, you’ll be more aware of what to expect now that you have added a child into the mix, and you can start saving for the future. Start by creating a will, if you haven’t already, in which your plans are laid out. Ask yourself who you would like to be your child’s guardian in the event of your death, as well as how and when your assets should be distributed. Next, do you currently have life insurance? This is a critical, yet underutilized, part of financial planning. Similarly to health insurance, discuss options with your provider (or your employer if life insurance is provided as part of your employment package). Remember that even if the premiums seem higher than they should be, the coverage will be worth it in the long run. C

Consider putting a set amount of money into a savings account each month; while it may seem like an added drain on your wallet, starting early allows the annual interest rates to steadily increase your wealth. The same applies to both short- and long-term investment accounts. If you’re not able to save, look for ways to cut expenses. Consider ditching expensive cable services for streaming options, or you could work out at home and save on gym membership costs. You can also review what you’re spending on car insurance each month. You may be able to lower your premiums if you bundle policies (e.g., car and home insurance), raise your credit score, and drive a vehicle with certain safety features.

Prepare for College and Retirement

A college fund is another important part of financial planning for parents; however, keep in mind that you should also be funding your retirement -- it would be difficult for your child to have to support you after retirement age. Use a variety of accounts to maximize your wealth, ensuring that your own needs will be taken care of. Then you can focus on starting a college fund for your child. Ideally, this should start as soon as possible once your child is born. College preparation is all about saving what you can when you are able. The price of education will likely continue to increase, but proper preparation will help ameliorate the cost.

Financial planning is one of the most daunting -- and important -- tasks you can undertake. Particularly as a parent, it may seem like there are too many parts of the process to keep track of in too short a time. However, if you begin by charting out your current and expected financial situation, you can approach financial planning logically and realistically, which will ultimately strengthen your family.

You may review helpful sources for your research in links below.

• total cost

• home’s worth

• net worth

• saving

• creating a will

• life insurance

• certain safety features

• retirement

• college fund

Are Seniors Prepared for Natural Disasters?

Wed, 20 Nov 2019 16:09:00 GMT

“A new national poll shows that many people over age 50 haven’t taken key steps to protect their health and well-being in case of severe weather, long-term power outages, or other situations.”

With hurricanes, tropical storms and wildfires becoming routine events, data from the National Poll on Health Aging suggest that older adults, loved ones and their care providers should take time to prepare for how they will cope and communicate in an emergency. The question is not if something will occur, but when. According to the article “Many Older Adults Aren’t Ready for Natural Disasters” from the website futurity.com (U. Michigan), fewer than half of the seniors surveyed have signed up for emergency warning systems from their community. Less than a third have an emergency kit prepared with essential supplies and medicines to get them through an emergency or to take with them, if there is an evacuation.

The poll asked a national sample of 2,000 adults age 50 to 80 about their readiness for several different types of emergency situations. About seventy-five percent said that they had already experienced at least one major emergency in their lives.

“Whether it’s as straightforward as a power outage that lasts a day, or as severe as a hurricane, tornado, or earthquake, preparing can make a huge difference,” says Preeti Malani, the poll’s director and a professor at the University of Michigan Medical School.

One of the key steps for an adult to take in disaster readiness is to talk with loved ones about what will happen in different types of emergencies, and what needs they should consider. For those who depend upon medicine, medical supplies and equipment, this can be lifesaving.

A basic emergency plan to evacuate and be safe is a smart idea for everyone. For older adults who have health issues or mobility challenges, this is particularly important.

There are some areas where seniors are prepared. 85% said they have a week’s supply of their medications on hand, and 72% say they have a week’s worth of other medical supplies.

Having a plan in place for disaster is important for seniors. So is having an estate plan, to prepare for life’s unexpected occurrences. If you don’t have an estate plan, speak with an estate planning attorney soon to have a will, power of attorney, healthcare proxy and other planning documents in place.

Reference: futurity.org (U. Michigan) (Sep. 4, 2019) “Many Older Adults Aren’t Ready for Natural Disasters”

When Selecting Beneficiaries Gets Overlooked

Mon, 04 Nov 2019 19:03:00 GMT

“If you’ve ever spent time working through your estate plan with a professional, you know how important it is to select and update your beneficiaries. Failing to do so can result in costly mistakes—for you and your loved ones.”

Here’s one way to mess up your estate plan: naming beneficiaries not by name, but by the generic term “children.” If yours is a blended family, your stepchildren may be out of luck, according to the article “Five mistakes to avoid when naming beneficiaries” from Delco Times. In many states, stepchildren aren’t recognized if the word “children” is used. Use your beneficiaries’ full names.

Here are more mistakes that people make about beneficiaries:

Failing to name a beneficiary on every account. The great thing about beneficiary designations as that they do not go through probate and beneficiaries receive assets directly from the custodian of the account. However, if you fail to name a beneficiary, the asset, whether life insurance proceeds or the entire balance of a 401(k) account will go to your estate, and then it will need to go through probate. For retirement accounts, your heirs will also lose the

ability to stretch withdrawals over their lifetime.

Failing to name a contingency beneficiary. What if the first person passes away before you and there’s no contingency beneficiary named? The asset goes through probate, as if there were no beneficiary named at all. If both people die at the same time, all of the funds must go through probate.

Neglecting to review beneficiary selections on a regular basis. You update your computer regularly, now treat your estate plan with the same care. Beneficiary designations override a will, so it’s very important to keep them current. Every few years, review the accounts that you own and see what your beneficiary designation choices are. This is especially necessary, if you have been divorced, widowed or remarried. If you fail to take your ex-spouse off an insurance policy, for instance, there’s little that can be done when you die—even if you put your wishes that a new spouse or children receive the proceeds in your will. If the dispute goes to court, your new spouse or children won’t be likely to win, no matter what your intentions may have been.

Not communicating with your partner and family members. Talking with family members and loved ones about your wishes for your legacy and asset distribution is an important way to let them know what to expect when you die. It’s not an easy conversation, but it will be helpful to all. Knowing you have a plan will alleviate them from the worry of the unknown. There’s no need to talk specific dollar amounts, unless you want to. Instead, give them a high-level overview of what your intentions are.

Some families find these conversations easier in the presence of an objective third party, like your estate planning attorney. If your estate plan includes trusts or any complex planning strategies, a family meeting provides a means of explaining the plan and the processes involved.

Reference: Delco Times (October 6, 2019) “Five mistakes to avoid when naming beneficiaries”

How Does an Executor Obtain a Credit Report for Decedent?

Mon, 30 Sep 2019 20:17:00 GMT

“While it’s not something many people think about until faced with the issue, obtaining a credit report for a deceased person is important. You may need to make sure the credit report is accurate and take stock of any creditors you need to notify of the death or see if there’s any unresolved debt that you’re not aware of.”

Obtaining the credit report for a decedent is important to protect their assets before any criminals target them for identity theft and credit card fraud, advises credit.com in the article “Dealing with a Credit Report for the Deceased.” Speed is of the essence for this estate task.

In most cases, the only person who is the subject of the credit report should have access to it. However, there are times when you need to pull someone else’s report, such as when a loved one dies. Other instances are when an employer is checking on a potential employee’s credit, or when a landlord wants to know more about a tenant.

To obtain a living person’s credit report, you must have permission. Permission can be granted on a rental or job application. You’ll also need their Social Security number, name and date of birth.

For someone who has passed, it isn't as simple as cutting up those cards and disposing of them. It is recommended that you notify the three credit bureaus as soon as possible after a death to make sure the account is marked as “deceased,” so no one can open a credit card account in the person’s name.

If you are the executor and you need to obtain a credit report of a person who has passed, here’s what you will need to do to protect their legacy and obtain their credit report. First, you’ll need certain documents:

Proof that you have been named executor of the estate
Testamentary letters from the probate court
An official copy of the death certificate
You should get several copies of each of these documents, since you will also need them for other aspects of the estate.

Before you can obtain the credit report, the will needs to be filed with the probate court. Your estate planning attorney can do this for you, as part of settling the estate. Once all the documents are in order, you’ll need to report the death and contact the three bureaus: Experian, TransUnion, and Equifax. You’ll also want a cover letter explaining that the person has passed and that you need the reports to settle the estate.

The letter should include the decedent’s name, their last known address and their Social Security number. There may be a fee, depending on the company’s policies.

Review the report thoroughly and check for any inaccuracies. Make note of any open accounts that need to be paid with the estate or notified of the death. Debts are not all cleared when a person dies, so you’ll want to know what needs to be taken care of. Look for anything suspicious. It could be a sign of theft or fraud.

The last step is to notify the credit bureaus, outstanding creditors and the Social Security Administration of the person’s death. Once proper notification has taken place, the bureaus will mark the credit record as being deceased. No further credit will be extended in the person’s name and no additional accounts can be opened.

Reference : credit.com (Aug. 27, 2019) “Dealing with a Credit Report for the Deceased.”

Ho! Ho! Ho! Do this before the holiday season makes you too busy

Wed, 18 Sep 2019 07:37:00 GMT

Nothing is Certain but Death and Taxes

“Most of us have heard the quote from Benjamin Franklin, ‘In this world, nothing is certain except death and taxes.’”

No one actually enjoys paying taxes, and few of us really want to think about our own death, but both require advance planning and careful consideration, advises Ohio’s Country Journal in the article “Death and Taxes.”

Think about how quickly the year has gone. Doesn’t it feel like only yesterday you were making New Year’s resolutions? Then it was tax season, which for more people is worse than going to the dentist. While we all know we should see our dentist on a regular basis, we also like to forget that we need to tackle our estate plan. We bet the pup in our photo has done exactly that.

Preparing for taxes and death: neither one is associated with warm, fuzzy feelings, but we still need to plan for it. This is to avoid burdening our families and loved ones. It’s hard enough to grapple with loss and grieving, but to be completely unprepared, makes matters worse for those who are left behind. Here are some suggestions to prepare for these certainties of life.

Have a last will and testament prepared. Work with an estate attorney who is licensed to practice in your state. It doesn’t matter if you have a simple life or a complicated one. You need a will.

Designate a power of attorney. Choose someone you trust to be able to sign important documents and take care of business, if you are unable. It does not have to be a family member. Sometimes a trusted advisor is the best candidate for a POA.

Have a living will prepared and designate a medical power of attorney. Again, choose someone you trust who will make the decisions you want. Talk with them about what you want and put your wishes in the document.

Create a master file and tell someone where important papers can be found. The documents include insurance policies, mortgages, wills, trusts, POA, healthcare POA, information about bank accounts, investment accounts, retirement plans. Don’t leave out contact information for your estate planning attorney, CPA, financial advisor or healthcare providers.

Plan your funeral service. Describe what you would like to happen, in as much detail as you can manage. This will help your family immeasurably, so they won’t be left wondering what you’d want or wouldn’t want. If you plan on being buried, purchase a plot. If you want to be buried with your spouse, purchase two adjoining plots.

Don’t forget digital assets. Make a list of all your digital accounts, usernames and passwords. If possible, name a person to handle your online accounts. Some digital platforms allow you to designate a person to manage your accounts, access your data and close your accounts. Others do not. If you have valuable data online, from business records to family photos, make sure you’ve planned for these assets.

All these items can be updated, as needed. In fact, every three or four years, you should update your estate plan, so that it is current with changing laws and doesn’t miss any opportunities. The same goes for large events in life, including births, deaths, marriage and divorce. Speak with an experienced estate planning attorney to make sure you are ready for the sure thing.

Reference: Ohio’s Country Journal (August 26, 2019) “Death and Taxes”

The Conversation with Your Doctor, Estate Planning Lawyer and Family Members

Sat, 07 Sep 2019 07:43:00 GMT

“The best way to ensure that they know and understand your wishes, is to take a copy of your advanced healthcare directive or living will with you to your next check up and talk to your physician about it, then ask them to keep the copy on file.”

Everyone needs to have an annual checkup, taking stock of their health with their primary physician and making sure that everyone is on the same page when it comes to instructions for health care and an advanced healthcare directive, also known as a living will. When people sign their last will and testament, everyone breathes a big sigh, says The Huntsville Item’s article “Make sure you talk to your doctor and family.” But that’s not the end of estate planning.

Your primary care provider needs to know what your wishes are, as well as your spouse and children. The best way to make sure they have this information, in addition to having a conversation, is to bring a copy of an advanced healthcare directive or living will with you to your next check up and talk with your doctor about it. Ask them to keep a copy on file.

It’s a good idea to give a copy of the Medical Power of Attorney and Medical Directive to Physicians and Family to each primary care physician, and a copy to the healthcare agents you have selected. Don’t forget to keep a copy or two in your records to take with you, if you ever have to go to the hospital. The signed original should be kept with all of your estate planning documents—in a safe place in your home, possibly in a fireproof safe.

Make sure to tell a few family members where these documents are, in case of an emergency.

The hardest part of estate planning is not usually picking the right fiduciaries or deciding how to distribute assets among loved ones. The hardest part is almost always having these conversations with family and loved ones.

It can be so daunting that families often don’t have these important discussions. Here’s the problem: avoiding the conversation doesn’t mean the issues go away. More family infighting takes place after a death than any other time. Emotions are running high, old wounds are opened, and unresolved issues, especially between siblings, come pouring out. If the parent who has died has always been the one who made peace between everyone, that buffer is gone.

Having this discussion in a low-pressure, non-emergency time, is something that every parent should do for their children. Consider a family gathering where the underlying agenda is to get everyone comfortable with the concept of talking about what the future holds. It doesn’t have to be a formal meeting; a casual family get-together is more likely comfortable for everyone.

If the conversations are taking place in a casual manner over an extended period of time, a lot of ground can be covered with less tension and stress. Getting people used to the idea that you know that you are not going to live forever, and you want to be sure they are taken care of, may make it easier for everyone when the time does come.

In some families, these conversations begin when all are invited to attend a family meeting with the estate planning attorney to discuss wills, powers of attorney and medical power of attorney. Sometimes having this conversation with an experienced professional can take some of the sting out of planning for the future.

Reference: The Huntsville Item (June 30, 2019) “Make sure you talk to your doctor and family”

Relocating for Retirement? What You Need to Know

Sun, 01 Sep 2019 07:57:00 GMT

“One of the great things about being retired is that you no longer have a job tethering you to a particular location. You have the freedom to move. However, just because you can pick up and go, doesn't mean it's a good idea to go just anywhere.”

Sometimes having too many choices can become overwhelming. Move closer to the grandchildren, or live in a college town? Escape yearly hurricane preparations, escape cold weather, or move to a mountain village? With the freedom to move anywhere, you’ll need to do some serious homework. A recent article titled “Don’t Relocate in Retirement Without Answering These 5 Questions” from Nasdaq contains some wise and practical advice.

There are some regions that are more retirement-friendly than others. If you end up in the wrong place, it could hurt your retirement finances. Therefore, ask these questions first:

What are the state’s taxes like? If you are living on Social Security benefits, retirement savings and a pension, the amount of money you’ll actually receive will vary depending on the state. There are 37 states that don’t tax Social Security benefits, but there are 13 that do. There are also some states that do not tax distributions from retirement accounts. Learn the local rules first. If you currently live in a state with no income tax, don’t move to a state that may require a big tax check.

If you live in a high tax state and don’t have enough money saved for a comfortable retirement, then moving to a lower tax state will help stretch your budget.

Is there an estate or inheritance tax, and is that a concern for you? If leaving money to heirs doesn’t matter to you, this isn’t a big deal. However, if you want to pass on your assets, then find out what the state’s inheritance taxes are. In some states, there are no taxes until you reach a pretty large amount. However, in states with inheritance taxes, even a small estate may be taxed, with those who inherit sometimes owing money on even small transfers.

What’s the cost of living compared to where you live now? When you’re working, moving to a place with a higher cost of living is not as big a deal, since your wages (hopefully) increase with the relocation. However, if your cost of living goes up and your income remains fixed, that’s a problem. The last thing you want to do is move to a place where the cost of living is so high, that it decimates your retirement savings.

If you live somewhere with high taxes and high prices, moving to a lower cost of living area will help your money last longer, and could make your retirement much easier.

Is it walkable or do you need a car? Cars present two problems for aging adults. One, they are expensive to maintain and insure. Two, at a certain point along the aging process, it becomes time to give up the keys. If you live in a walkable community, you may be able to go from having two cars to having one car. You might even be able to get rid of both cars and do yourself a favor, by walking more. This also gives you far more independence, far later in life.

What’s healthcare like? Even people who are perfectly healthy in their 50s and 60s, may find themselves living with chronic conditions in their 70s and 80s. You want to live where first-class healthcare is available. Check to see what hospitals and doctors are in the area before moving. You should also find out if medical care providers accept Medicare. Consider the cost of a nursing home or home care in your potential new community. Some areas of the country have much higher costs than others.

Reference: Nasdaq (Aug. 9, 2019) “Don’t Relocate in Retirement Without Answering These 5 Questions,”

Second Time Down the Aisle? Make Sure Estate Plan Is Ready

Sun, 25 Aug 2019 08:04:00 GMT

“The first thing to realize is that as soon as you marry, your spouse is granted certain inheritance rights under law. However, these rights of inheritance can be waived or modified by using an anti-nuptial agreement, or as its more commonly known, a pre-nuptial agreement.”

It’s always a good idea to review your estate plan, especially when a major life event, like a second marriage, is taking place. The use of a pre-nuptial agreements gives prospective spouses the opportunity to discuss one another’s rights of inheritance, and clarify a great many issues, says nwi.com in the article “Estate Planning: Planning for second marriages.”

There’s a second opportunity to sign an agreement detailing inheritance rights after the wedding takes place, called a “post-nuptial agreement.” The problem is that once the wedding has occurred and you are both legally married, you might get stuck with some surprises and, well, you’re married. For most people, it’s better to set things out before the wedding, rather than after.

There also may have been dissolution decrees in one or both of the couple’s prior divorces that have requirements which must be satisfied. A spouse may be required to maintain life insurance with the ex-spouse as a beneficiary. This can have an impact on the couple’s estate plan. It is recommended thay you have everything discussed up front in the pre-nup.

The rest of the steps are those that should be followed for any estate review.

Make sure that the last will and testament reflects your new spouse. If there are any mentions of the prior spouse, you probably want to remove them.

Verify how all of the assets are owned. Will they continue to be owned by just one spouse, or converted to jointly owned? Does your estate plan have a trust, and if so, are assets owned by the trust? Does there need to be a change made to your trustees?

Many people don’t remember how their bank accounts are titled. Fewer still can tell you who their beneficiaries are on their retirement accounts, life insurance policies and bank accounts. Remember: the beneficiary designations are going to determine who receives these assets, regardless of any language in your last will and testament. Once you die, there is no way to contest that distribution. Review your accounts and make sure that the beneficiaries are up to date.

Part of your pre-nup and estate plan review will be to discuss inheritance rights for any children in the blended family. Do you want to leave assets only for your children, or do you want to leave assets for all the children? It’s not an easy conversation to have, especially at the start of the blending process.

Remember also that blended family dynamics can change over the years. When you review your estate plan next—in three to four years—you’ll have the opportunity to make changes that hopefully will reflect deepening bonds between all of the family members. Your estate planning attorney will help create and revise estate plans, as your life circumstances evolve.

Reference: nwi.com (May 5, 2019) “Estate Planning: Planning for second marriages”

Can a Transaction Occur if One Spouse is Incapacitated? An Ounce of Prevention is Worth a Pound of Cure.

Sun, 18 Aug 2019 08:08:00 GMT

“The wife did not have a durable power of attorney authorizing her spouse to act as her agent in selling the property and now apparently lacked the capacity to sign one.”

An elderly married couple wished to sell their home, but they had a big problem. The notary public refused to notarize the wife’s signature, because she clearly did not understand the document she was being asked to sign. Because there was no power of attorney in place that could have authorized her husband to represent her, the transaction came to a halt.

This situation, as described in Lake Country News’ article “When one spouse becomes incapacitated,” is not an uncommon occurrence. The couple needed to petition the court for an order authorizing the transaction. When community property is concerned and one spouse is competent while the second is not, the competent spouse may ask the court for permission to conduct the transaction.

The request in California requires the following:

The incapacitated spouse must have an examination by a physician and a capacity evaluation form must be filed with the court. This is the same as a conservator proceeding.

The court must appoint a “guardian ad litem” to represent the incapacitated spouse’s interests. The person might be an adult child, or an attorney. That person must then file a written report with their recommendation to the court.

Next, the transaction must involve the couple’s community property. The order may affect additional separate property interests in the same transaction. If there is no community property, it is permissible for the well spouse to change some of the well spouse’s private property into community property to meet the requirements for community property.

The transactions must also be for one of several allowed purposes, including the best interests of the spouses or their estates, or for the care or support of either spouse.

In the example that starts this article, the purpose was to authorize the sale of their home, so they could move out of state to live with their children. Another example could be to transfer property, so an incapacitated spouse may become eligible for government benefits.

Finally, the notice of hearing and a copy of the petition must be served on all the incapacitated spouse’s children and grandchildren. Any of these individuals are permitted to object and could set the proceedings back months or even years.

Why wait? Talk about this now. How much easier would it be to simply meet with an estate planning attorney long before there are any health or mental capacity issues and have a power of attorney document created for each of the spouses?

Speak with an experienced estate planning attorney to have your estate plan, which includes the power of attorney document, and have all these important documents created before you need them.

Reference: Lake Country News (July 27, 2019) “When one spouse becomes incapacitated”

How Does an Irrevocable Trust Work?

Wed, 14 Aug 2019 08:16:00 GMT

“An irrevocable life insurance trust (ILIT) can provide peace of mind, as you start your estate planning process. If you have a sizable estate or young beneficiaries, an ILIT can provide control over a life insurance policy that a last will and testament may not.”

There are pros and cons to using a revocable trust, which allows the grantor to make changes or even shut down the trust if they want to, and an irrevocable trust, which doesn’t allow any changes to be made from the creator of the trust once it’s set up, says kake.com in the article “How an Irrevocable Life Insurance Trust (ILIT) Works.”

Revocable trusts tend to be used more often, since they allow for flexibility as life brings changes to the person who created the trust. However, an irrevocable life insurance trust may be a good idea in certain situations. Your estate planning attorney will help you determine which one is best suited for you.

This is how an irrevocable trust works. A grantor sets up and funds the trust, while they are living. If there are any gifts or transfers made to the trust, they are permanent and cannot be changed. The trustee—not the grantor—manages the trust and handles how distributions are made to the beneficiaries.

We cannot always see what the future holds around the next bend, through the next tunnel, and we might hesitate to choose something irrevocable due to those unknowns. Considerate this though, despite their inflexibilities, there are some good reasons to use an irrevocable trust.

With an ILIT, the death benefits of life insurance may not be part of the gross estate, so they are not subject to state or federal estate taxes. They can be used to cover estate tax costs and other debts, as long as the estate is the purchaser and not the grantor. Just bear in mind that the beneficiaries’ estate may be impacted by the inheritance.

Minors may not be prepared to receive large assets. If there is an irrevocable trust, the death proceeds may be placed directly into a trust, so that beneficiaries must reach a certain age or other milestone, before they have access to the assets.

If there are concerns about legal proceedings where assets may be claimed by a creditor, for example, an irrevocable trust may work to protect the family. A high-liability business that faces claims whether you are living or have passed, can add considerable stress to the family. Place assets in the irrevocable trust to protect them from creditors.

The IRS notes that life insurance payouts are typically not included among your gross assets, and in most instances, they do not have to be reported. However, there are exceptions. If interest has been earned, that is taxable. And if a life insurance policy was transferred to you by another person in exchange for a sum of money, only the sum of money is excluded from taxes.

An ILIT should shield a life insurance payout and beneficiaries from any legal action against the grantor. The ILIT is not owned by the beneficiary, nor is it owned by the grantor. It makes it tough for courts to label them as assets, and next to impossible for creditors to access the funds.

However, there are some quirks about ILITs that may make them unsuitable. For one thing, some of the tax benefits only kick in, if you live three or more years after transferring your life insurance policy to the trust. Otherwise, the proceeds will be included in your estate for tax purposes.

Giving the trust money for the policy may make you subject to gift taxes. However, if you send beneficiaries a letter after each transfer notifying them of their right to claim the gifted funds for a certain period of time (e.g., 30 days), there won’t be gift taxes.

The most glaring irritant about an ILIT is that it is truly irrevocable, so the person who creates the trust must give up control of assets and can’t dissolve the trust.

Speak with your estate planning attorney to learn if an ILIT is suitable for you. It may not be—but your estate planning attorney will know what tools are available to reach your goals and to protect your family.

Reference: kake.com (July 19, 2019) “How an Irrevocable Life Insurance Trust (ILIT) Works”

Estate Planning a Necessity for Small Business Owners

Sun, 11 Aug 2019 08:25:00 GMT

“As a small business owner, you have worked incredibly hard to make your business a success. What began as an idea is now, due to your vision and hard work, a successful business.”

Just as the small business owner must plan for their own personal estate to be passed onto the next generation, they must also plan for the future of their business. This is why you need a comprehensive estate plan that addresses both you personal life and the business, says grbj.com’s recent article “Estate planning for small businesses.” Here are the basic strategies you’ll need as a small business owner:

A will. A last will and testament allows you to name someone who will receive your assets, including your business, when you die. If you don’t have a will, you leave your heirs a series of problems, expenses and stress. In the absence of a will, everything you’ve worked to attain will be distributed depending on the laws of the state. That includes your assets and your business. It’s far better to have a will, so you make these decisions.

A Living Trust. A living trust is similar to a will, in that it allows you to name who will receive your assets when you die. However, there are certain advantages to having a trust. For one thing, a trust is a private document, and assets controlled by the trust can bypass probate. Assets controlled by a will must first go through probate, which is a public proceeding. If you’ve ever had a family member die and wonder why all those companies seemed to know that your loved one had passed, it’s because they get the information that is available to the public.

If your business is owned by a trust, the transition of ownership to your intended beneficiaries can be a much smoother process.

A financial durable power of attorney. This document lets you appoint an agent to act on your behalf, if you are incapacitated by illness or injury. This is a powerful legal document, so take the time to consider who you want to give this power to. Your agent can manage your finances, pay your bills and manage the day-to-day operations of your business.

A succession plan. Here is where many small business owners fall short in their planning. It takes a long time to create a succession plan for a business. Sometimes a buy-out agreement is part of a succession plan, or a partner in the business or key employee wishes to become the new owner. If a family member wishes to take over the business, will they inherit your entire ownership interest, or will there be a payment required? Will more than one family member take over the business? If a non-family member is going to take over the business, you’ll need an agreement documenting the obligation to purchase the business and the terms of the purchase.

If you would prefer to have the business sold upon your death, you’ll need to plan for that in advance so that family members will be able to receive the best possible price.

A buy-sell agreement. If you are not the sole owner, it’s important that you have a buy-sell agreement with your partners. This agreement requires your ownership interest to be purchased by the business or other owners, if and when a triggering event occurs, like death or disability. This document must set forth how the value of ownership interest is to be determined and how it is to be paid to your family. Without this kind of document, your ownership interest in the business will pass to your spouse or other family members. If that is not your intention, you’ll need to do prior planning.

The right type of life insurance. This is an important part of planning for the future for the small business owner. The death benefit may be needed to provide income to the family, until a business is sold, if that is the ultimate goal. If a family member takes over the business, proceeds from the life insurance policy may be needed to cover payroll or other expenses, until the business gets going under new leadership. Life insurance proceeds may also be used to buy out the other partners in the business.

Failing to plan through the use of basic estate planning and succession planning can create significant costs and stress. An experienced estate planning attorney can review the strategies and documents that are appropriate for your situation. You’ll want to ensure a smooth transition for your business and your family, as that too will be part of your legacy.

Reference: grbj.com (Grand Rapids Business Journal) (July 19, 2019) “Estate planning for small businesses”

Avoiding a Family Feud When Choosing a Power of Attorney

Sat, 03 Aug 2019 08:31:00 GMT

“Deciding who gets the power of attorney is an important step for parents looking to organize their estate and plan for a future without them.”

The challenge in tasking a family member or trusted friend is not just making sure they have the necessary skills, but to navigate family dynamics so that no fights occur says Considerable.com in the article “How to assign power of attorney without sparking a family feud.” Every family situation is different, but in almost all cases, transparency is the best bet.

Start by understanding exactly what is meant by power of attorney, how it functions within the estate plan and how siblings can all be involved to some degree with the family’s decision-making process.

Power of attorney is a term that gives an individual, or sometimes, individuals, the legal authority to act on behalf of someone else. It is usually used when a person, usually a parent or a spouse, is unable to make decisions for themselves because of illness or injury. It must be noted that power of attorney relates to financial and legal decisions. There are methods to address making decisions for another person for their health care or end-of-life decisions, but they are not accomplished by the power of attorney (POA).

It should be noted that there is a distinct difference between power of attorney and executor of the estate. Power of attorney is in effect while the person who has granted the authority is alive, but unable to act on their own behalf. The executor of the estate assumes responsibility for managing the estate through the probate process. While they are two different roles, they are often held by the same person, usually an adult child who is responsible and has good decision-making skills.

There are different types of power of attorney roles. The most common is the general power of attorney, followed by the health care or medical power of attorney. The general power of attorney refers to the person who has the authority to handle financial, business or private affairs. If a parent grants power of attorney to one of their children, that child then has the authority to act on behalf of the parent.

Trouble starts if the relationship between siblings is rocky, or if major decisions are made without discussions with siblings. Start a discussion so your family will all begin rowing your boat in the same direction.

It’s not easy for siblings when one of them has been granted the power of attorney. That means they must accept the inherent authority of the chosen sibling to make all decisions for their parent. The sibling with the power of authority will have a smoother path, if they can be sensitive to how this makes the others feel.

“Mom always liked you best,” is not a sentence that should come from a 50-year-old, but often childhood dynamics can reappear during these times.

Remember that the power of attorney is also a fiduciary obligation, meaning that the person who holds it is required to act in the best interest of the parent and not their own. If the relationship between siblings is not good, or there’s no transparency when decisions are made, things can get bumpy.

Here are some tips for parents to bear in mind, when deciding who should be their power of attorney:

Understand the great power that is being given to another person.
Make sure the person who is to be named POA, understands the entire range of responsibilities they will have.
The siblings who have not been named will need to understand and respect the arrangement. They should also be aware of the potential for problems, keeping their eyes open and being watchful without being suspicious.

Some families appoint two siblings as a means of creating a “checks and balances” solution. This can be set up, so the agents need to act jointly, where both agree on an action, or independently, where each has the full authority to act alone. In some cases, this will lessen the chances for jealousy and mistrust, but it can also prolong the decision-making process. It also creates the potential for situations where the family is engaged in a deadlock and important decisions don’t get made.

Parents should discuss these appointments with their estate planning attorney. Their years of experience in navigating family issues and dynamics give the attorneys insights that will be helpful with assigning these important tasks.

Reference: Considerable.com (July 10, 2019) “How to assign power of attorney without sparking a family feud”

What Do These People Know about Retirement that You Don’t?

Mon, 29 Jul 2019 18:26:00 GMT

In fact, 18% of both baby boomers and Gen Xers expect to work past age 74, according to Northwestern Mutual's 2019 Planning & Progress Study.”

The idea of retiring early and leading a life of complete leisure does have its appeal. However, not everyone is in a big hurry to say goodbye to their working life. Many people enjoy their work, finding it rewarding, enjoying the social aspect of their job or, they just need the money. It’s hard to argue with some of these positive attributes of working longer, says USA Today in the article “18% of baby boomers and Gen Xers plan to work past age 74. Why you should do the same.” Preferably, it should be a choice.

If you’re convinced that you’re going to stop working as soon as you possibly can, it may be worthwhile to consider a few good reasons to continue going to work. Consider these reasons:

Keep your retirement savings growing. The more money you accumulate in your retirement accounts, the more financial security you’ll have in your later years. However, a large percentage of middle-aged and older workers are woefully behind. How many? Try 17% of all boomers who have less than $5,000 saved for retirement, according to the study referenced above. Retire too early, and you’ll have far fewer options. Working longer will give you more time to save more.

Let your Social Security benefits reach their maximum potential. Another aspect of a smaller retirement nest egg is an increased dependency on Social Security benefits, which were never designed to replace 100% of worker’s incomes. One way to maximize your benefits, is to wait to take your benefits as long as possible, up to age 70. Doing so could allow you to accrue delayed retirement credits that increase benefits by 8% a year.

Say your Social Security benefit at age 67 is $1,500. If you keep working until 70, that monthly benefit will grow to $1,860. If you are the higher earner, your surviving spouse will receive higher benefits.

Stay socially connected and avoid boredom. Did you know that retirees are more likely—by 40%—to be diagnosed with depression? Most of that is a direct result of being bored. Older Americans who don’t work, often struggle to adjust to their new lifestyle. If you don’t have a lot of free cash to spend on travel and activities, you may find yourself bored, restless and isolated.

If your job also serves as a social outlet, you may be better off mentally and financially to extend your working years.

People don’t like the idea of a shorter period of retirement, especially when their family and friends are starting to retire. However, remember that people are living longer these days, and one out of every three people who are 65 right now are expected to live past age 90, while roughly one in seven will live past age 95.

You don’t have to miss out on retirement just because you work a few more years. If your finances and your mental health will benefit from sticking around on the job, it’ll be well worth the effort.

Reference: USA Today (June 29, 2019) “18% of baby boomers and Gen Xers plan to work past age 74. Why you should do the same.”

Just How Do Those Transfer on Death Accounts Work?

Sun, 21 Jul 2019 08:36:00 GMT

“Transfer on death (TOD) accounts can keep your estate planning intact, while keeping your beneficiaries out of court. If you’re among the 57% of adults who don’t currently have a will or trust, your family is likely headed to probate court.”

Even estates with wills usually do go to probate court. This is not a major issue in some states and an expensive headache in others. By changing some accounts to transfer on death (TOD), you can avoid some assets going through probate, says Yahoo! Finance in the article “Transfer on Death (TOD) Accounts for Estate Planning.”

Here’s how it works:

A TOD account automatically transfers the assets to a named beneficiary, when the account holder dies. Let’s say you have a savings account with $100,000 in it. Your son is the beneficiary for the TOD account. When you die, the account’s assets transfer to him.

A more formal definition: a TOD is a provision of an account that allows the assets to pass directly to an intended beneficiary, the equivalent of a beneficiary designation. Note that the laws that govern estate planning vary from state to state, but most banks, investment accounts and even real estate deeds can become TOD accounts. If you own part of a TOD property, only your ownership share transfers.

TOD account holders can name multiple beneficiaries and split up assets any way they wish. You can open a TOD account to be split between two children, for instance, and they’ll each receive 50% of the holdings, when you pass.

One thing to bear in mind: the beneficiaries have no right or access to the TOD account, while the owner is living. The beneficiaries can change at any time, as long as the TOD account owner is mentally competent. Just as assets in a will can’t be accessed by heirs until you die, beneficiaries on a TOD account have no rights or access to a TOD account, until the original owner dies.

Simplicity is one reason why people like to use the TOD account. When you have a properly prepared will and estate plan, the process is far easier for your family members and beneficiaries. The will includes an executor, who is the person who takes care of distributing your assets and a guardian to take care of any minor children. Absent a will, the probate court will determine who the next of kin is and distribute your property, according to the laws of your state.

A TOD account usually requires only that a death certificate be sent to an agent at the account’s bank or brokerage house. The account is then re-registered in the beneficiary’s name.

Whatever is in your will does not impact the TOD account. If your will instructs your executor to give all of your money to your sister, but the TOD account names your brother as a beneficiary, any money in the account is going to your brother. Your sister will get any other assets. In this way, a TOD account is a simple way to set aside money for someone without altering an established trust and will if the funds are not being moved in violation of the trust.

Beware the need to run this by your estate planning attorney; in some states, marital rights might override a designation of beneficiary on a TOD account.

Speak with an estate planning attorney about how a TOD account might be useful for your purposes.

Reference: Yahoo! Finance (June 26, 2019) “Transfer on Death (TOD) Accounts for Estate Planning”

What Happens when Parents want to Disinherit a Child?

Thu, 11 Jul 2019 09:05:00 GMT

“Any estate plan, even a deed, can be overturned on the basis of undue influence, which is a three-legged stool.”

Deliberately disinheriting a child requires special care, advises the Santa Cruz Sentinel , in the article “No shortcuts when planning estate trust.” The law is designed to require people to be very clear on their wishes, when it comes to disinheriting offspring.

Let’s consider this example: A couple has a son and a daughter. Both are named beneficiaries on a revocable trust. The parents decide they want to change the revocable trust, naming the daughter as the sole beneficiary. They also want to revoke the son’s power of attorney. The trust is simple, and the assets include a home and some bank accounts.

Anyone has the right to leave their assets to anyone they choose, but the couple (and the daughter) should expect the son to challenge this disinheritance and if that is truly what they wish, they need to plan in advance for litigation.

For starters, the couple needs to meet with their estate planning attorney, privately, with the daughter nowhere in sight. She should not even give them a ride to the attorney’s office. There will be questions about “undue influence” directed at her.

Undue influence is a legitimate reason to challenge an estate plan. The three factors in undue influence are:

“Confidential relationship”—meaning that the parents trust and confide in the daughter;

“Active procurement”—for instance, if the daughter made the appointment, joined in the meeting and spoke on behalf of her parents; and

“Unjust enrichment,” which means that one person is trying to get more than a “fair” share.

If these three conditions are met, the changes in the estate could be found to be invalid. The burden of proof would be on the daughter to prove that this was what her parents wanted and not what she devised. It would not be an easy case.

This couple needs to meet with their estate planning attorney and amend their trust. The attorney and their staff members will be considered “disinterested witnesses” who will be able to speak to the parents’ mental capacity and whether it was truly their intent to favor the daughter. The attorneys in this case need to be extra careful to take thorough notes. If there is a lawsuit, the daughter might have the opportunity to say why the change was made, but her testimony may be disregarded as self-serving.

Another question that comes up when people want to disinherit a child, is whether they should simply change the name on the deed to the home, thinking that this will avoid an estate battle. That becomes problematic on many levels. If they decide they want to sell the home, or borrow against it, or get a reverse mortgage, then the deed must be retitled again. If the daughter gets title to the home and has some kind of legal trouble, a judgement lien could be recorded against the house. That behavior defeats the purpose of a trust.

Parents who are thinking of disinheriting a child need to speak with an experienced estate planning attorney to prepare the correct estate planning documents and to prepare for any lawsuits that may result.

Reference: Santa Cruz Sentinel (June 9, 2019) “No shortcuts when planning estate trust.”

Business Owners Need Estate Plan and a Succession Plan

Wed, 03 Jul 2019 18:41:00 GMT

“If you own a business, you’ve always got plenty to think about: sales, marketing, employees, competition, industry trends and consumer preferences. The list goes on and on.”

Business owners get so caught up in working in their business, that they don’t take the time to consider their future—and that of the business—when sometime in the future they’ll want to retire. Many business owners insist they’ll never retire, but that time does eventually come. How will you avoid hanging the closed sign? Specifically, the question The Gardner News article asks of business owners is this: “Do you have a business succession strategy?”

It takes a very long time to create a succession plan that works. Therefore, planning for such a plan should begin long before retirement is on the horizon. That’s because there are as many different ways to map out a succession plan, as there are types of business. A business owner could sell the business to a family member, an outsider, a key employee or to all the employees. The plan could be implemented while the business owner is still alive and well and working, or it could be set up to take effect, only after the owner passes.

The decision of how to handle a succession plan needs to be made with a number of issues in mind: family dynamics and interest in the business (or lack of interest), the nature of the business, the success of the business and the owner’s overall financial situation.

Here are a few of the more popular strategies:

Selling the business outright. There are business owners who don’t need the money and feel that no one else will care as much as they do about their business. Therefore, they sell it. There needs to be a lot of planning to minimize tax liability, when this is the choice.

Using a buy-sell arrangement to transfer the business. This can be structured in whatever way works best for both parties. It allows a slower transition to new ownership. Some families use the proceeds of a life insurance policy to fund the buy-sell agreement, so family owners could use the death benefit to buy the owner’s stake.

Buying a private annuity. This permits the owner to transfer the business to family members, or someone else, who then makes payments to the owner for the rest of their life, or maybe their life and another person, like a surviving spouse. It has the potential to provide a lifetime stream of income and removes assets from the owner’s estate, without triggering gift or estate taxes.

The plan for succession needs to align with the business owner’s estate plan. This is something that many estate planning attorneys who work with business owners have experience with. They can help facilitate the succession planning process. Talk with your estate planning attorney when you have your regular meeting to review your estate plan about what the future holds for your business.

Reference: The Gardener News (June 4, 2019) “Do you have a business succession strategy?”

The Gift a Graduate Really Needs: Legal Documents

Mon, 01 Jul 2019 18:50:00 GMT

“Graduation season is complete! Now many families will start making plans for their young adult children to leave home for college, travel or to begin a new job.

As children or grandchildren start new chapters in their lives, one thing to be aware of: once they turn 18, parents no longer have access to their medical, legal or financial information. Parents are not legally able to made medical or financial decisions on behalf of their adult children, even if they are ill or incapacitated, warns grbj.com in the article “Give your graduate the gift of legal documents.”

Here are recommended steps to take, so parents can still be involved in their children’s lives when they are needed:

Health care proxy/medical power of attorney. Even if you are the person paying for health insurance, you are not legally permitted to make decisions on their behalf. Have your child sign a proxy/POA form designating who has the primary authority to make health decisions, if he or she is unable to do so. This is especially important when parents are divorced: both parents need to have the proper forms. Your estate planning attorney will be able to prepare these for you.

Durable power of attorney. If your child has signed a durable POA, you will be able to handle their financial matters, especially if your child becomes incapacitated.

HIPAA authorization. Medical providers may not disclose a patient’s medical status, unless they have legal permission. Your child should sign a HIPAA authorization with each of their providers, giving the parent access to all their information. This is especially necessary for a child with health or mental issues.

FERPA waivers. This one takes many parents by surprise. Even if you are the one paying for tuition and all college expenses, the college will not provide academic records, including grades and tuition bills, due to the Family Education Rights and Privacy Act. Contact the college and find out exactly what forms they need to be sure you have access to all of your children’s information, including any health and mental health treatment.

Wills and trusts. If a child has assets and no descendants, they need a will or revocable trust to protect the parent’s taxable estate and allow someone to manage these assets, if they die prematurely.

Medical records . Make sure the child has access to their medical records, including medications, allergies, immunizations, etc.

Insurance . See if the family’s medical, homeowner’s and auto insurance coverage extend to a child living away at school and in another state. If the child is renting a house or apartment, make sure they have renter’s insurance.

Proof of identity. Make sure the child has access to their passport, birth certificate or Social Security card, so they can get an internship or a job.

Bank accounts and credit cards . If the family’s regular bank does not have a branch where the child is attending school, the parents should consider opening a basic checking account at a local branch. Both parents and child should be on the account.

Registration. It’s time to register to vote and sons will need to register with Selective Service.

Helping children transition into adult life is both exciting and worrisome. The more information you can provide them with, and the more they learn to do for themselves, the better they will be able to manage their lives independently.

Reference: grb.com (June 7, 2019) “Give your graduate the gift of legal documents.”

Johnny Hallyday’s Estate Battle Pivots and is Decided on Instagram Posts

Tue, 25 Jun 2019 18:56:00 GMT

“Johnny Hallyday, known as the French Elvis, built his six-decade show business career on old-fashioned rock ’n’ roll, but he also kept up with the times technologically.”

The French rocker started using Instagram in 2012 and shared a mix of his personal and professional life with fans. Instagram has now helped two of his children defeat his widow in the first stage of an estate battle for an estate that the French news media values at tens of millions of dollars, reports The New York Times in the article “French Rock Star’s Instagram Defeats His Widow in Inheritance Battle.”

When Mr. Hallyday died in 2017, two testaments were found in a safe deposit box. One, which was written in Los Angeles, appointed his wife Laeticia as sole heir and manager of his estate. The will completely excluded his grown children from two prior relationships, David Hallyday and Laura Smet. This is not permitted under French laws of inheritance.

The two children have been fighting to prove that their father lived most of his life in France, and not in the United States.

Laeticia, who was the singer’s fourth wife, told a court outside of Paris that Johnny had settled in Los Angeles in 2007, their daughters Jade and Joy went to school in Los Angeles and he had received a green card in 2014. Court documents also reflect her telling about his fascination for Elvis Presley and American culture.

However, his son David offered something that was a bit more concrete: a chart of where the couple spent their time from 2012 to 2017, based on Johnny’s Instagram posts.

The chart revealed that Johnny spent at least 151 days in France in 2015 and 168 days the year after. He then spent eight straight months in France, mostly because of his illness, before his death in 2017.

The court accepted the children’s argument, ruling that it, and not an American court, had the competence to make decisions on Johnny’s estate. The New York Times notes that Ms. Hallyday plans to appeal the ruling.

The battle over the inheritance includes the performer’s rights on more than 1,000 songs, as well as properties in France, California and on St. Bart’s in the Caribbean. The French public has been fascinated by his life and now, by the estate battle. An estimated 15 million people watched a tribute to him in Paris after his death, when he received a hero’s tribute.

This case is an example of how social media and the law intersect. As we live more and more of our lives online, social media posts are increasingly being used as evidence. The newness of the material is similar to what happened in the early 20th century, when the telephone was still relatively new and the admissibility of conversations on the telephone as evidence, was still being debated.

Reference: The New York Times (May 29, 2019) “French Rock Star’s Instagram Defeats His Widow in Inheritance Battle.”

Are Inheritances Taxable?

Sat, 22 Jun 2019 19:04:00 GMT

“There is nothing wrong with letting your inheritance sit, until you have explored all of your options and have a full understanding of how a windfall can affect your personal taxes.

Inheritances come in all sizes and shapes. People inherit financial accounts, real estate, jewelry and personal items. However, whatever kind of inheritance you have, you’ll want to understand exactly what, if any, taxes might be due, advises the article “Will I Pay Taxes on My Inheritance” from Orange Town News . An inheritance might have an impact on Medicare premiums, or financial aid eligibility for a college age child. Let’s look at the different assets and how they may impact a family’s tax liability.

Proceed with Caution

Bank Savings Accounts or CDs . As long as the cash inherited is not from a retirement account, there are no federal taxes due. The IRS does not impose a federal inheritance tax. However, there are some states, including Iowa, Kentucky, Maryland, Nebraska, New Jersey and Pennsylvania, that do have an inheritance tax. Speak with an estate planning attorney about this tax.

Primary Residence or Other Real Estate. Inheriting a home is not a taxable event. However, once you take ownership and sell the home or other property, there will be taxes due on any gains. The value of the home or property is established on the day of death. If you inherit a home valued at death at $250,000 and you sell it a year later for $275,000, you’ll have to declare a long-term capital gain and pay taxes on the $25,000 gain. The cost-basis is determined, when you take ownership.

Life Insurance Proceeds. Life insurance proceeds are not taxable, nor are they reported as income by the beneficiaries. There are exceptions: if interest is earned, which can happen when receipt of the proceeds is delayed, that is reportable. The beneficiary will receive a Form 1099-INT and that interest is taxable by the state and federal tax agencies. If the proceeds from the life insurance policy are transferred to an individual as part of an arrangement before the insured’s death, they are also fully taxable.

Retirement Accounts: 401(k) and IRA. Distributions from an inherited traditional IRA are taxable, just as they are for non-inherited IRAs. Distributions from an inherited Roth IRA are not taxable, unless the Roth was established within the past five years.

There are some changes coming to retirement accounts because of pending legislation, so it will be important to check on this with your estate planning attorney. Inherited 401(k) plans are or eventually will be taxable, but the tax rate depends upon the rules of the 401(k) plan. Many 401(k) plans require a lump-sum distribution upon the death of the owner. The surviving spouse is permitted to roll the 401(k) into an IRA, but if the beneficiary is not a spouse, they may have to take the lump-sum payment and pay the resulting taxes.

Stocks. Generally, when stocks or funds are sold, capital gains taxes are paid on any gains that occurred during the period of ownership. When stock is inherited, the cost basis is based on the fair market value of the stock or fund at the date of death.

Artwork and Jewelry. Collectibles, artwork, or jewelry that is inherited and sold, will incur a tax on the net gain of the sale. There is a 28% capital gains tax rate, compared to a 15% to 20% capital gains tax rate that applies to most capital assets. The value is based on the value at the date of death or the alternate valuation date. This asset class includes anything that is considered an item worth collecting: rare stamps, books, fine art, antiques and coin collections fall into this category.

Speak with an estate planning attorney before signing and accepting an inheritance, so you’ll know what kind of tax liability comes with the inheritance. Take your time. Most people are advised to wait about a year before making any big financial decisions after a loss.

Reference: Orange Town News (May 29, 2019) “Will I Pay Taxes on My Inheritance”

Will Contests May Be Rare, but They Do Happen

Mon, 17 Jun 2019 20:25:00 GMT

“If a person makes a Will when he does not have the mental capacity to make a Will or when he is so dominated by another that he can't make the Will that he wants to make, a Will contest often results.”

In an ideal world, wills and estate plans are created when people are sound of mind and body, just as the familiar legal phrase describes. The best way to avoid a will contest is to have a well-written will, prepared by a qualified estate planning attorney who can help avoid legal contest. However, there are times when this is not the case, says The Huntsville Item in the article “Legal Corner: Will contests while rare are messy.”

A will is contested, when the person challenging the will believes that it does not represent the true intent of the testator to pass the estate to the people he wanted.

A will must be written in the correct form and executed according to the law in order to be valid. This is why it is necessary to work with an estate planning attorney to create a will. A person may try to do it on their own, typing it out, downloading a form or copying a form, but because the law is very strict about the form and execution, many of these do-it-yourself wills end up being deemed invalid by the courts.

When the will is not valid, the laws of intestate are applied to the person’s estate. This is rarely in accordance with the person’s wishes, but at this point, it’s too late.

To make a will, the person must have “testamentary capacity.” That means that he or she knows what they are doing, what their estate includes and who the recipients of the estate will be. They also must not have been subject to undue influence. That means that the person making the will is so controlled and dominated by another person, that they were not able to make the will that they wanted.

One of the goals of a properly prepared will, is to prevent any family fights after a loved one has passed.

Studies have found that the struggle over mom’s necklace or dad’s watch are not about the material items themselves, but over the symbolic meaning of those items. When families fight over inheritances, it’s rarely because of the actual item or even the money.

As the family’s older member, you want to do anything you can to avoid fracturing the family after you’ve gone.

Unless you take the steps to create a will and a strong estate plan, your loved ones could be entrenched in a long inheritance conflict that lasts years and consumes more resources than anyone can spare. However, with careful planning, you can avoid inheritance conflicts. After all, estate planning is more for those you love than for you.

Rely on the skill and knowledge of an experienced estate planning attorney and leave your family intact.

Reference : The Huntsville Item (May 26, 2019) “Legal Corner: Will contests while rare are messy”

Power of Attorney: Why You’re Never Too Young, Why You May Wish to Have Several, and Let's Talk Tailoring!

Wed, 12 Jun 2019 20:28:00 GMT

“Although we all like to make our own decisions, there may come a time when we no longer have that luxury.”

When that time comes, having a power of attorney is a critical document to have. The power of attorney is among a handful of estate planning documents that help with decision making, when a person is too ill, injured or lacks the mental capacity to make their own decisions. The article, “Why you’re never too young for a power of attorney” from Lancaster Online , explains what these documents are, and what purpose they serve.

There are three basic power of attorney documents : financial, limited and health care. But don't pause there, these documents can be tailor made, read on.

It’s never too early, but it could be too late. If you become incapacitated, you cannot sign a POA. Then your family is faced with needing to pursue a guardianship and will not have the ability to make decisions on your behalf, until that’s in place.

You’ll want to name someone you trust implicitly and who is also going to be available to make decisions when time is an issue.

For a medical or healthcare power of attorney, it is a great help if the person lives nearby and knows you well. For a financial power of attorney, the person (or persons) may not need to live nearby, but they must be trustworthy and financially competent.

Always have back-up agents, so if your primary agent is unavailable or declines to serve, you have someone who can step in on your behalf.

Let's talk about a perfect fit. You should also work with an estate planning attorney to create the power of attorney you need. You may want to assign select powers to a POA, like managing certain bank accounts but not the sale of your home, for instance. An estate planning attorney will be able to tailor the POA to your exact needs. They will also make sure to create a document that gives proper powers to the people you select. You want to ensure that you don’t create a POA that gives someone the ability to exploit you.

Any of the POAs you have created should be updated on a fairly regular basis. Over time, laws change, or your personal situation may change. Review the documents at least annually to be sure that the people you have selected are still the people you want taking care of matters for you.

Most important of all, don’t wait to have a POA created. It’s an essential part of your estate plan, along with your last will and testament.

Reference : Lancaster Online (May 15, 2019) “Why you’re never too young for a power of attorney”

Selling a Parent’s Home after They Pass

Fri, 07 Jun 2019 20:29:00 GMT

“Dealing with the death of a parent is challenging but selling their home can be fraught with land mines, particularly if they die without a will.”

Family members who are overtaken with grief are often unable to move forward and make decisions. If a house was not being well maintained while the parent was ill or aging, it might fall into further disrepair. When siblings have emotional attachments to the family home, says the article “With proper planning, selling a parent’s house can be a relatively painless process,” from The Washington Post, things can get even more complicated.

Parents can take steps while they are still living to ward off unnecessary complications. It may be a difficult conversation but having it will make the process easier and allow the family time to focus on their emotions, rather than the sale of property. Here are a few pointers:

Make sure your parents have a will. Many Americans do not. A survey from Caring.com found that only 42% of American adults had a will and other estate planning documents.

Be prepared to spend some money. Before a home is sold, there may be costs associated with maintaining the property and fixing any overdue repairs. Save all receipts and estimates.

Secure the property immediately. That may mean having the locks changed as soon as possible. Once an heir (or someone who believes they are or should be an heir) moves in, getting them out adds another layer of complications.

Get real about the value of the property. Have a real estate agent run a competitive market analysis on the property and consider an appraisal from a licensed appraisal. Avoid any accusations of impropriety—don’t hire a friend or family member. This needs to be all business.

Designate a contact person, usually the executor, to keep the heirs updated on how the sale of the house is progressing.

The biggest roadblock to selling the family house is often the emotional attachment of the children. It’s hard to clean out a family home, with all of the mementos, large and small. The longer the process takes, the harder it is.

This is not the time for any major renovations. There may be some cosmetic repairs that will make the house more marketable, but substantial improvements won’t impact the sale price. Remove all family belongings and show the house either empty or with professional staging to show its possibilities. Clean carpets, paint, if needed and have the landscaping cleaned up.

Keep tax consequences in mind. Depending on where the property is, where the heirs live and how much money is being inherited, there can be estate, inheritance and income taxes. It is usually best to sell an inherited property, as soon as the rights to it are received. When a property is inherited at death, the property value is “stepped up” to fair market value at the time of the owner’s death. That means that you can sell a property that was purchased in 1970 but not pay taxes on the value gained over those years.

Talk with an experienced estate planning attorney about what will happen when the home needs to be sold. It may be better for parents to create a revocable trust in advance, which will direct the sale, allow a child to continue living in the home for a certain period of time, or instruct the one child who loves the home so much to buy it from the trust. Trusts are typically easier to administer after parents pass away and can be very helpful in preventing family fights.

Reference: The Washington Post (May 16, 2019) “With proper planning, selling a parent’s house can be a relatively painless process”

The Conversation You Need to Have with Your Parents

Tue, 04 Jun 2019 20:53:00 GMT

“Parents are often more than happy to offer financial advice to their children. They like to feel needed and want to make sure you're on solid financial ground. However, it's important to turn the tables and ask about their financial plans, too.”

Sometimes the way to ease into a conversation with aging parents about money and their plans for the future, is to start by discussing your own. You want to know about their will or retirement finances? Start by explaining your own plan, how you’ve decided to set up your estate and then ask what they’ve done for themselves.

If something happens to their parents, the children are the most likely ones to step in and take charge, whether it’s caring for a surviving spouse or stepparent or of the entire estate. The more you know in advance, the better equipped you’ll be.

Your first real job is a good opening to talk about saving for retirement. Ask them what they did, or do, about 401(k) contributions. This will give you insight into how well-prepared and knowledgeable they are about retirement savings. If you’re house hunting, that’s an excellent opportunity to get them talking about their retirement plan. Do you need to buy a home with a possible “in-law” suite in mind? It’s not a bad question to ask. It shows that you are thinking about their future needs.

Untangling an estate when there’s no will and no advance planning has been done, can tear a family apart. That’s the last thing you or your parents want. Talking openly with them about money, trusts, wills, life insurance and advance medical directives, will give you an idea of what they have or have not done to plan for the future. It may spur them on to move forward with plans that they’ve procrastinated on.

Even if you learn that they haven’t done any planning and don’t have a will, that is better than not knowing until it’s too late. If you learn that this is the case, you can start educating them about what will happen, if they don’t meet with an estate planning attorney. You can offer to take them to meet your estate planning attorney or offer to get them a few names so that they can decide who they are most comfortable with.

Starting a family and setting up your own estate plan is another opportunity to ask your parents what they did and what their thoughts are about your plans. Their family may have never done any estate planning, and they might have more than a few family horror stories to share. In that case, you can help them change the family’s dynamic, by helping them to take a different path.

Reference : Barchart (April 16, 2019) “Ask your folks about their financial plans”

How a Single 401(k) Works for Self-Employed

Sat, 01 Jun 2019 20:58:00 GMT

“There are many perks to being self-employed—flexible hours, the possibility of working from home and, of course, being your own boss. However, one major downfall that has historically burdened solopreneurs is the lack of access to traditional employer-sponsored retirement plans, such as a 401(k).”

Known as the Single 401(k), the Self-Employed 401(k), Individual 401(k), or the Solo 401(k), this is a retirement plan designed for self-employed people or sole proprietors, and if applicable, also for their spouses. With a Single 401(k), 100% employee salary deferral of up to $19,000 is permitted in 2019, if you are under 50. If you’re over 50, that number can go up to $25,000. It also allows an employer profit-sharing contribution of up to $56,000 per year, which lets you save even more by being both the employer and an employee of your business.

Using the Single 401(k) can save you more than $14,000 in taxes per year (that is, assuming a $56,000 contribution and a 25.7% corporate tax rate), while simultaneously offering a loan provision, just in case you need to tap your savings.

Who qualifies for a Single 401(k)? You have to be truly self-employed, either in your own full-time small business or a part time gig. Your business can be a sole proprietorship, partnership, or corporation, but it can only have no other employees or employees who aren’t eligible to participate in a traditional 401(k). Examples of people who aren’t eligible would be people who are under age 21 or who work fewer than 1,000 hours per year.

The Single 401(k) works well for a husband/wife partnership or a small business with only part-time employees.

It provides flexibility so that when times are good, you can put away a lot. When times are lean, you can save less. Additional benefits:

Small business owners don’t have an HR department to rely on, so it’s a good idea to talk with your estate planning attorney about how a Single 401(k) will work for your long-term retirement and estate plan.

Reference : Next Avenue (May 3, 2019) “A Retirement Plan for the Self-Employed: The Single 401(k).”

Singles Need Two Key Documents, No Matter How Young

Sat, 25 May 2019 20:59:00 GMT

“As it turns out, though, living wills and durable power of attorney for healthcare are two things that single people might especially want to give some thought to.”

A woman is shopping, when suddenly she is struck by abdominal pains that are so severe she passes out in the store. When she comes to, an EMT is asking her questions. One of those questions is “Do you have a living will or a medical power of attorney?” That was a wake-up call for her and should be for other singles also, says Morningstar in the article “2 Estate-Planning Tools That Singles Should Consider.”

What is a Living Will? A living will is sometimes called an advance medical directive. It details your wishes, if you are in a situation where life-sustaining treatment is the only way to keep you alive. Would you want to remain on a respirator, have a feeding tube or have other extreme measures used? It’s not pleasant to think about. However, this is an opportunity for you to make this decision on your own behalf, for a possible future date when you won’t be able to convey your wishes. Some people want to stay alive, no matter what. Others would prefer to turn off any artificial means of life support.

This spares your loved ones from having to guess about what you might like to have happen.

What is a Durable Power of Attorney for Healthcare? This is a legal document that gives a person you name the ability to make decisions about healthcare for you, if you can’t. To some people, this matters more than a living will, because the durable power of attorney for healthcare can convey your wishes in situations, where you are not terminally ill, but incapacitated.

Find someone you trust, whose judgment you respect and have a long, serious talk with them. Talk about your preferences for blood transfusions, organ transplants, disclosure about your medical records and more. Doctors have a hard time when a group of relatives and friends are all trying to help, if there is no one person who has been named as your power of attorney for healthcare.

What else does a single person need? The documents listed above are just part of an estate plan, not the whole thing. A single person should have a will, so that they can determine who they want to receive their assets upon death. They should also check on their beneficiary designations from time to time, so any insurance policies, investment accounts, retirement accounts, and any other assets that allow beneficiary designations are going to the correct person. Some accounts also do not permit non-spouses as beneficiaries. As unfair as this is, it does exist.

The takeaway here is that to protect yourself in a health care emergency situation, you should have these documents in place. Speak with an experienced estate planning attorney. This is not a complicated matter, but it is an important one.

Reference : Morningstar (April 23, 2019) “2 Estate-Planning Tools That Singles Should Consider”

Review Life Insurance Trusts in Estate Plans

Wed, 22 May 2019 21:01:00 GMT

“Life insurance trusts have long been hailed as a smart way to provide financial protection for loved ones, while simultaneously avoiding any adverse estate tax consequences. However, the question that most often arises today in the context of a life insurance trust is, do I really need it?”

With the doubling of the estate tax exemption to $11.4 million per person and $22.8 million per married couple, with very few exceptions, the estate tax has become irrelevant until the new tax law sunsets in 2025. In the meantime, however, people who had life insurance trusts created, may want to consider dismantling them, says Think Advisor in the article “Section 1035-Your Way Out of Obsolete Life Insurance Trusts.”

The federal estate tax isn’t the only estate tax. If you live in a state with estate and inheritance taxes, where transfer tax exemptions are being held to pre-reform levels, then the state estate tax is still the same as before.

If you have risk management concerns, whether they are from a business, malpractice possibility or something else, the asset protection value provided by the life insurance trust makes it worth keeping.

If the life insurance trust itself would permit the trustee to distribute the life insurance to the beneficiary or beneficiaries, then the life insurance trust could be dismantled, by distributing the life insurance owned by the trust to its beneficiary. For example, if your spouse is the beneficiary, then the trustee could give the policy to your spouse. If there are no other assets held in the trust, that would be it—no assets in the trust, no trust.

However, in some cases there may be remainder beneficiaries, and if that is the case, you ‘ll need to obtain their consent. That may not be an issue, if the remainder beneficiaries are your own adult children. If there is concern about future issues, the execution of a non-judicial settlement agreement would be used to provide a formal agreement to dismantle the trust and distribute the policy.

Some people may choose to dismantle their life insurance trusts but recognize that they still need the life insurance protection. One option is executing a 1035 exchange and getting rid of the old policy, in exchange for a policy or financial product better suited for current needs. Consider this as a way to obtain long-term care protection.

The IRC Section 1035 exchange rules allow the owner of a financial product, including life insurance or annuity contracts, to exchange one product for another, without treating the transaction as a sale. No gain is recognized if the first contract is disposed of properly, and there is no tax liability as long as the rules of the exchange are followed. A life insurance policy can be exchanged for another life insurance policy, an annuity, or an endowment contract with long-term care benefits.

The owner of the policy or contract may not change. An exception is only if a policy insuring two lives in a second to die policy, is exchanged for a single life policy after the death of one of the original insureds.

Talk with your estate planning attorney about whether any of the above makes sense for your situation. The transaction must be handled correctly to avoid any tax consequences and protect the continuity of the financial instrument. There are many details, and this should only be handled by an experienced attorney.

Reference : Think Advisor (April 17, 2019) “Section 1035-Your Way Out of Obsolete Life Insurance Trusts”

Spring is Financial Cleaning Season

Sun, 19 May 2019 21:27:00 GMT

Start by making a monthly payment schedule with company name, due date and amount due. Include estimated taxes, property taxes, insurance premiums and any other bills that you receive on a routine basis. Use this to help budget and plan for the coming year.

Set up electronic bill paying through your bank for recurring bills. You can make your mortgage payments, insurance and all predictable expenses occur automatically. Keep all paper bills that arrive by mail, like property tax and insurance premium notices, until they are paid.

Schedule a set time to pay your bills. That may be weekly, biweekly, or monthly, but make an appointment for yourself and stick to it. During this time, review your monthly payment schedule, review statements for accuracy, pay and then either file or toss.

Set up systems for your important documents. Don’t just stuff them in a file cabinet. Use a manual filing system, a three-ring binder, electronic scanning and storage or a combination of a few different methods. If you go all digital, make sure you have an encrypted and automatic back-up system.

If you don’t already have one, open a safe deposit box or purchase a highly-rated fireproof safe to store documents like birth certificates, marriage licenses, deeds, car registrations, estate planning documents and passports. Tell family members where these documents are located and provide instructions so they can be accessed in an emergency. In addition to yourself and your spouse, give a family member the ability to access your safe deposit box.

Consolidate your accounts. If you have more than one checking, savings, retirement or brokerage account, try to simplify your life by combining like accounts. Fewer accounts mean fewer statements, less paperwork and less hassle, when filing taxes.

The same goes for credit cards. If you can’t close cards because of outstanding balances, create a spreadsheet of outstanding balances, the interest rates you are paying and payment dates for each. Get serious about paying them off, attacking the ones with the highest interest rates first.

If you haven’t reviewed your estate plan or your beneficiary designations, review all your accounts and estate planning documents. This is a good time to make an appointment with your estate planning attorney, especially if you haven’t reviewed your estate plan in three or four years.

Reference: The Press-Enterprise (March 30, 2019) “Add this to Kondo-spring cleaning list: Organize your finances”

What Will the SECURE Act Do?

Fri, 17 May 2019 21:04:00 GMT

“The retirement income crisis has spurred Congress into action. Both the House and Senate introduced bills in early April, which would provide U.S. workers with expanded opportunities to participate in employer-provided retirement plans.”

For the 75 million boomers and the Generation Xers who follow, the retirement income crisis has gotten Congress to act together, an unusual occurrence in these divisive times. Both the House and Senate have introduced bills that would provide American workers with expanded opportunities to participate in employer-sponsored plans.

The House Ways and Means Committee has unanimously passed a bipartisan bill, The SECURE Act: “Setting Every Community Up for Retirement Enhancement.” This bill incorporates provisions from the Senate bill RESA (Retirement Enhancement and Savings Act of 2019). Together, RESA and SECURE are the most sweeping retirement legislation, since the Pension Protection Act was passed in 2006.

The SECURE act is a complex bill. For our purposes, we’ll focus on four key components.

How much financial security will SECURE actually provide? It depends on who you are. If you are in good health, with a stable work and a financial cushion, it may help you. However, if you are living paycheck to paycheck, there’s not much here to crow about.

Lower income Americans, especially those with physically taxing jobs, tend to have shorter work lives, exiting the labor market in their 60s or younger, because of health problems. Giving them more time to invest and draw benefits may not have much of an impact on their retirement finances.

The ability to contribute 5% more to a 401(k) or participate in a plan set up by a small business may be appealing, but it only works for those who have the money to participate in the first place.

The most promising aspect of the SECURE act is the opportunity to be enrolled in a plan for part-time and temporary workers. More Americans now work part time. Many of them are women caring for children or parents or retirees who returned to work, because they needed the cash flow.

Another positive aspect is the small business that benefits from setting up a plan that automatically enrolls employees in a plan. If contributions are set to a default of 3%, with the ability to opt out or increase the amount, that may get people who would otherwise not save at all the ability to set something aside for their retirement.

Reference: Next Avenue (April 25, 2019) “Will the SECURE Act Really Bring Retirement Security to Older Americans?”

Summer Have You Thinking of Moving? The Top Three and Bottom Three States for Retirees

Sun, 12 May 2019 21:05:00 GMT

“There are a number of reasons why people approaching retirement might want to relocate. Chief among them is the need to stretch their savings and their Social Security checks.”

New Mexico, “The Land of Enchantment” state, is seeing an influx of retirees, which is the same reason people are moving to Florida and Arizona. They’re fleeing New Jersey, Maine, and Connecticut, according to a survey from the moving company United Van Lines. The company asked 26,998 of its customers who moved from Jan. 1, 2018 to Nov. 30, 2018 why they were moving and where.

According to CNBC ’s article “Retirees are flocking to these 3 states—and fleeing these 3 states in droves,” four out of 10 people who moved to New Mexico said it was for retirement.

New Mexico seems to be taking over the lead from Florida, when it comes to retirement. Florida was second, followed by Arizona, and the cost of living is a key factor. After examining the cost of housing, medical expenses and income taxes, retirees or soon-to-be retirees are making their plans.

Another important factor is how states treat Social Security income. There are still states that tax Social Security, which is a big turn off for retirees. Those states are: Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, and Vermont.

New Jersey is experiencing a big outflow of residents. It has the highest effective property tax in the country: 2.13%, according to the Tax Foundation. It also has a top individual income tax rate of 10.75%, applicable to income exceeding $5 million.

Affordability is a significant factor in retirement relocation, but there are other factors to consider, including:

Family and friends. If you can afford to stay where all your family and friends are, isn’t that worth a “friends and family” tax? Who will be on your emergency contact list in a new home town? Will you make a new network of friends to serve as your retirement family?

Know before you go. Get to know the area before buying anything. If you can, rent for a six-month or one-year period. You should also go off-season, if retirement has you considering an area with a high number of tourists. A busy beach community that becomes a deserted island may not be as much fun as when the crowds all leave — or it may be better. Live there before committing permanently.

Call your financial advisor. Don’t go anywhere, until doing a comprehensive analysis of the costs of the move and the new location’s cost of living. What does an active lifestyle cost in a new town? Just as important, what would it cost if you or a spouse become seriously ill in the new home? Is there quality health care nearby, or would you have to return home for any kind of serious medical care?

Call your estate planning attorney. If your plans include moving to a state far from family and friends, you’ll need to be sure that all estate planning documents are up to date. You’ll also need to have your current estate plan reviewed to make sure it will be valid in your new home state.

Reference : CNBC (April 17, 2019) “Retirees are flocking to these 3 states—and fleeing these 3 states in droves”

What About an Ethical Will? (Psst, it's a legacy letter and you can do it)

Tue, 07 May 2019 21:07:00 GMT

“Have you considered how to pass on your non-material assets?”

When the discussion turns to ethical wills, people often sigh and say they wish they had such a document from a parent or a grandparent. No one has ever told Debby Mycroft, who is described by Next Avenue in “The Ethical Will: Life Is About More Than Your Possessions,” that they wouldn’t want to read an ethical will from a beloved family member.

Mycroft is a writer who focuses on helping people write their legacy letters.

People without children create ethical wills to share them with the friends who have become their family. In one instance, Mycroft’s client was a woman who had been placed in child protective services, because her parents were not able to care for her. She wanted to write a letter to other foster children to share her story and let them know that they too could overcome a rough start to life.

Whoever you are, you have a story to tell. You don’t have to be a war hero or win a Nobel Prize to have a story that will be loved by your family, friends, or even strangers. Every one of us has a unique journey through life, and we all have lessons, stories and values to share.

The process of writing an ethical will can bring great peace of mind. By writing an ethical will, you’ve created a legacy that will live on, long after you are gone. For some people, writing a legacy letter to share their values fosters clarity of their values. That leads them to start living their life more intentionally.

If you aren’t sure how to start writing a legacy letter, there are websites and books about this topic, including online templates. Unlike an online will, there are no legal requirements for a legacy will. Therefore, you are free to create a document any way you want.

Do you need to work with a professional? For a regular will and an estate plan, yes, you need an experienced estate planning attorney. However, with a legacy will, you can do it on your own or work with a professional writer. But don’t worry too much about format or grammar in your legacy letter. Whether your legacy letter is elegant or rough, simple or complex, as long as it contains the truth, it will be a wonderful gift.

Tell stories to share your values; they are better than lists of what matters to you. One woman wrote a story about signing a contract for a job that she thought was clerical but turned out to be factory work. She fumed about it, but her parents explained that she had signed a contract and made a commitment. She stuck with the job, learning about integrity, persistence and diligence. After that job was completed, the employment agency sent her on great assignments, because they knew she was reliable and stuck to her word. That’s a life lesson to share.

There are some things that should be left out of a legacy letter. Criticism, judgments, regrets and family secrets need to be given serious consideration. What are you trying to accomplish with a letter that will be shared among generations? You don’t want to leave behind a legacy of destruction. If you write such a letter, read it a few times over a period of time to see, if that’s really how you want to be remembered. You can always tear it up and start over again.

Ask a trusted friend to have a look at your legacy letter. They may see omissions that hurt the ones you love, like the woman who wrote about her two children, but devoted pages to one and not the other. An objective reader will be able to help you avoid some pitfalls.

Videos and recordings are great. However, remember that technology changes, and the phone that you record your video on may not work in five, ten, or fifty years. Include a hard copy of the letter and add hard copy family photos. Those will work, regardless of changes to technology. Be sure to make copies easily available, perhaps place some with your Will for easy finding. You might be sure to include your digital assets and passwords in your actual Will and Estate Plan so these treasures are not lost.

Finally, consider sharing the letter with members of the family before you die. What a wonderful gift to share. This way you can expand on the stories, mend wounds, answer questions and grow closer.

When is the best time to create your legacy letter? How about now? Mycroft recalls her own mother, who was the only one who knew the stories of the family. She had given her mother a fill-in-the-blanks family history book, hoping to preserve the history. When she cleaned out her mother’s house, she found the book — and it was completely blank. If you have a living relative, sit down with them to write or record the history, before it’s too late.

Reference : Next Avenue (April 11, 2019) “The Ethical Will: Life Is About More Than Your Possessions”

Having a Generous Spirit is a Good Thing for Many Reasons

Thu, 02 May 2019 21:09:00 GMT

“Gifting can be done for other reasons during life or as bequests at death. The reasons for doing so could be to accomplish non-tax or tax goals.”

Many people give generously throughout the year, for birthdays, to help children or grandchildren with college costs or just because they want to help family or friends. However, according to the New Hampshire Union Leader’s article “Lifetime (noncharitable) giving has many advantages—and not just for tax purposes.”

Lifetime giving means that you are more involved with giving, than if your giving occurs after you have died. Perhaps the best part of gifting with warm hands, is that you are able to enjoy seeing the recipient (donee) benefit from your gift. It’s a good feeling to see a person have his life enriched by your generosity.

If you die with no will, the intestacy laws of your state will determine who gets what. With a will, you have the opportunity to make your intentions known clearly. However, since you will not be alive, you won’t be able to see the actual transfer of property. A beneficiary might decide that they don’t want an asset. It is also possible that someone who always told you that he loved the painting in the foyer of your home, may decide to sell it, instead of keeping it.

Lifetime giving lets you react to changing circumstances and provides some control over how your assets are distributed.

After your death, your property and your estate may go through probate, which in some states can be a lengthy process. Lifetime giving also reduces the costs associated with probate and estate administration, because they won’t be included in your estate at the time of death. Assets that come out of the probate estate, reduces the likelihood of estate creditors or dissatisfied heirs. Lifetime gifts are private, while probate is public.

However, there are also tax advantages. If your gifting program is structured correctly by an experienced estate planning attorney, income and estate taxes can be decreased. Generally, a gift is not taxable income to the donee. However, any income earned by the gift property or capital gain subsequent to the gift, is usually taxable. The donor holds the responsibility of paying state or federal transfer taxes imposed on the gift. There are four taxes to be aware of: the state gift tax, the state generation-skipping transfer tax, federal gift and estate taxes and the federal generation-skipping transfer tax.

Many people give, because they want to support charitable causes or help friends and family enjoy a higher quality of life. The need to reduce the size of an estate to lower estate taxes is now less prominent, since the federal estate tax exemption is so high. It should be kept in mind that the new tax laws regarding federal estate taxes end in 2025. That may seem far away, but it will be here soon enough.

Another way to give, is to help with college expenses. Any gift must be made directly to a qualified institution. Similarly, if you’d like to help a friend or family member with medical expenses, a gift needs to be made directly to the healthcare provider. Not only are these types of transfers exempt from federal gift and estate taxes, but they are outside of the $15,000 annual gift exclusion gift you can make to an individual in any given calendar year.

This is a simple overview of gifting. An estate planning attorney should be consulted to create a plan for giving, that aligns with your overall estate plan and tax management plan.

Reference : New Hampshire Union Leader (April 7, 2019) “Lifetime (noncharitable) giving has many advantages—and not just for tax purposes”

What Happens When Unmarried Couples Don’t Have Wills? And more you can do.

Fri, 26 Apr 2019 21:13:00 GMT

“Two very dear friends of ours have lived together, unmarried, for more than 20 years. He owns the house. Both were married before and have grown children and grandchildren.”

The couple may be pleased with their decision to live on their own terms. However, by failing to plan for the inevitable, they are creating an unnecessary difficulty for their loved ones. The children and grandchildren of the couple are likely going to end up having to sort out the mess, after one of the couple dies. They may end up in court, battling over the house or other assets.

If the couple wants their property to end up in the hands of their children when they pass away, having no estate plan is not the way to make that happen. When one spouse dies, any assets they own in joint tenancy will go to the surviving partner. When the surviving partner passes, those assets will go to their children, and nothing will be passed to the other family.

The surviving partner will have no legal right to the assets of the deceased partner, other than any that have been titled to joint tenancy. There is no community property between cohabitating couples, unless they have registered as domestic partners. Let's talk more about that in a moment. This is how the law works in California, and every state has its own rules. Assets owned by the deceased partner that are titled in his or her name only, belong to the decedent’s probate estate and will pass to their children. If the gentleman dies first, in this example, will his companion be left homeless?

This is a situation that can be easily remedied with an estate plan, creating wills and trusts that clearly spell out how they want their assets to be distributed upon death. There are many different ways to make this happen, but they will need to work with an estate planning attorney. Where the surviving non-homeowner will live after the homeowner dies is a serious issue, unless other plans have been made. One way to do this is to leave a life estate in the home in his will, or by creating a trust that holds the home for her use. When she dies, the home can then pass to his children. In that case, a series of agreements about how the home will be maintained may need to be created.

More about registries. If marriage does not suit you, please go to your local court or registrar and look into the domestic partner registry process. This registry may provide you with some basic rights of access to your partner and confirms your intentions. Consider the benefits when emergency strikes, some packages include a registry card for your wallet to quickly prove your relationship at the emergency room and more. Consider it part of your estate planning process.

Taking the time and making the investment in an estate plan, is for the benefit of the individual and the family. An indifferent attitude about the future is hurtful to those who are left behind.

Reference: Santa Cruz Sentinel (April 7, 2019) “Longtime unmarried couple hasn’t planned for future”

Retirement Benefits Disappeared? Here’s Help

Tue, 23 Apr 2019 21:16:00 GMT

“No one wants to lose money, particularly for retirement. However, it happens — people lose track of, or don't know they have, retirement accounts.”

Sometimes companies change their names, or are sold, and people can’t find them. Some people may not even know that they were automatically enrolled in a 401(k) plan, according to the article “Finding lost retirement benefits” from Albany Times Union. There are also employees who leave in a huff and never complete paperwork. How many HR directors have the time or resources to track down former employees?

There’s no exact number for how many unclaimed benefits there are, but a report released by the GAO (Government Accountability Office) reports that more than 25 million people left at least one retirement plan behind, when they left a job in the years between 2004-2013. Could one of those people, be you?

Here’s what you need to know to start looking for lost retirement accounts:

Start digging through your old files. Depending on how you keep your records, that may mean cracking open the filing cabinets that have been stored in the basement for the last 20 years, or the stack of the stuff you’ve been meaning to file that just keep growing. You might find some clues in old tax paperwork, employment related documents or the folders you received when you started working in a new job, filed and forgot about. If the company has been bought and sold a few times, this may take a while, even if you do finally locate the original paperwork.

Contact your old employer. If you cannot find the company, then try the Department of Labor website for Form 5500 filings. This form would have contact information for the plan. The DOL also has the EBSA — Employee Benefit Security Administration — that offers help over the phone. On the website, you’ll find a searchable database for abandoned pension plans.

There is a federal agency in charge of insuring private-sector pension benefits– the Pension Benefit Guaranty Corp. The PBGC has reported that more than 80,000 people who earned a pension have not yet claimed it, and more than $400 million is waiting for them. The pension amounts range from twelve cents to almost a $1 million.

Check your state’s Unclaimed Property division. Each state has its own database, and there’s also a website called missingmoney.com that was created by the National Association of Unclaimed Property Administrators.

Contact the Social Security Administration. The SSA might provide a notice alerting you to potential benefits, when you are ready to claim your Social Security benefits. However, this is only a notice, and does not guarantee that the funds are still there.

Another source to contact is the U.S. Administration on Aging’s Pension Counseling and Information Program , which provides legal assistance at no cost.

A word to the wise, is to keep track of all accounts through your employer with a system of either paper or digital files. If you leave a job, make sure that you have all the necessary documents about all of the benefits offered. If you don’t get to this task until a few months into a new job, that’s okay too — just as long as you get to it before too much time goes by.

Reference: Albany Times Union (March 30, 2019) “Finding lost retirement benefits”

What You Need to Know, If the Next Generation Is Inheriting the Family Farm

Wed, 17 Apr 2019 13:08:00 GMT

“As the next generation buys out, is gifted, or inherits the farm, what are frequent sticking points that arise?”

If you receive the property as a gift from parents while they are alive, then you retain their income tax basis in the property. If they inherited it also, they likely have a low tax basis. Farms with a basis of $50,000 that are now worth $2 million are not unusual. If the farm is sold, there will be a capital gains tax on the difference between the basis and the present value, which could be more than $600,000.

If you inherit the farm from a parent and then sell it for $2 million, its value at the time of their death, you would not have to pay a capital gains tax. That saves $600,000.

The estate tax may not be so bad, depending upon your state’s estate tax, which is probably lower than the highest capital gains rate. If you live in Oregon, you may be eligible for the Oregon National Resource Credit, which was created to reduce Oregon estate taxes on family farms. Your estate planning attorney will be able to help you plan for and manage these taxes.

If you bought the farm from a parent’s trust or estate for $2 million, then you have a $2 million basis in the property and will probably not owe any property gains tax, if you eventually sell it for $2 million.

Just be sure that you comply with all reporting requirements. If you are in Oregon and took the Oregon National Resource Credit, then for five out of eight years after the death, the recipient of the inherited property is required to file an annual certification to keep the credit that was used to lower the estate tax. Failure to comply, means that a portion of the estate tax will have to be repaid.

If you own the farm without other family members, you should start planning your next steps. To whom do you want to pass the farm? If you want to keep the farm in the family, work with an attorney who is familiar with farm families, so that you can keep working the land and reduce any disputes.

Farmers often separate business operations from the land, with the operations held by one business and the land held by another entity. This allows the estate planning attorney to plan for succession in how operations and land are transferred to the next generation. It also provides asset protection, while you are alive.

Make sure that your farm succession plan and your estate plan are aligned. A common issue is finding that buy-sell documents don’t align with the will or trust. Some farmers use a revocable living trust as a will, so they can incorporate estate tax planning and transition the farm privately upon death.

Reference: Capital Press (March 24, 2019) “The family farm is coming to you: What’s next?”

Beneficiary Designations and Your Estate Plan. It's Spring Cleaning Time!

Fri, 12 Apr 2019 13:09:00 GMT

“A well-executed estate plan is a thing of beauty – but make sure you aren’t neglecting some of the equally important parts of the process.”

Now that tax season is behind us, assuming it is signed, sealed and in the mailbox....let's pull up another important 'spring cleaning' to-do item. Cleaning up the details that make your estate plan work.

Here’s an example: Carol’s partner Roger, with whom she had lived for more than two decades, passes away. They had never married. Roger had been estranged from his daughter from a previous marriage and hadn’t spoken to her in more than two decades. Roger had made a will that specifically left everything to Susan and specifically disinherited his daughter.

When Carol contacted Roger’s employer to find out about his retirement plan, she was stunned to learn that he had never changed his named beneficiary. His daughter was the beneficiary and she would receive his entire IRA. The company representative could not even discuss the matter with Carol, because she was not the beneficiary. The couple had planned on Carol having that money to help after he passed, but the beneficiary designation was not changed.

Later, while cleaning out Roger’s files, Carol found the forms to change the beneficiary designation — but they had never been mailed.

Roger owned some property, so the will had to be brought to the Register of Wills office to register it for probate. This is the process where the executor obtains court approval to act on behalf of the deceased person. Problem number two: Roger had downloaded a will from the Internet, and it had not been properly signed or executed. Since it was not properly signed, the estate planning attorney who was helping Carol had to locate the notary and the witnesses. This was starting to get expensive, and it was taking much longer than it would have, if a proper will had been drafted.

The tag dealer, whose employee had notarized the will, said that the person was no longer employed at the company and no one knew where he was. The witnesses were unavailable. The probate process became even more troublesome.

Things only got worse from there. The will that Roger had downloaded from the Internet also included “default inheritance clause,” which meant that the estate was obligated to pay taxes on the money that was left to Roger’s daughter. This meant even less money for Carol. Not only does Roger’s estranged daughter get the money, but Susan has to pay the taxes out of her share.

A will is too important to be left to chance and hope that an online document is correct. Wills need to be created and executed with the utmost care. Roger thought he was saving himself some money, but the expense and stress he caused for Carol was a financial and emotional disaster. A competent estate planning attorney would have asked about beneficiary designations, reviewed all of Roger’s assets and asked the right questions about his daughter and what he wanted to do.

Beneficiary designations are as important as a will, and need to be reviewed from time to time, just as will and an estate plan must be reviewed. As lives change, estate planning documents need to change with them. So when you think spring cleaning, here's your next to-do.

Reference: Daily Times (Feb. 27, 2019) “ Senior Life: Costly Estate Planning Mistakes—Don’t forget about those beneficiary designations”

There’s A Reason Why There are Laws about Wills and Estates

Sun, 07 Apr 2019 13:11:00 GMT

“A man executes a will leaving his property to three people. Later, he executes a new will removing one of the heirs. Finally, he executes a third will, leaving his property to the original three people but doesn't get the will witnessed. Which will is in control?”

First, is the third will valid? If there were no witnesses, it seems very clear that it is not. Except for very unusual circumstances, a will is only valid if it is in writing, signed by the person who is its “creator,” which is the “testator,” and witnessed by not one but two witnesses.

The next question is, how about that second will? Is it valid? Was the second will revoked, when the third was created, even though it was not properly executed?

There are two basic ways to revoke a will: physical destruction or written instrument. If the will was not destroyed, then the revocation of the second is considered to have occurred by the creation of the third will. Most wills contain a recital revoking all previous wills and codicils, which serves as a written revocation.

However, there’s a problem. Because the third will is most likely void, then it could not have revoked the second will. Will revocations also need to be witnessed, and since the third will was not witnessed, the recital contained in the third will revoking the prior wills is also void.

It, therefore, seems that the second will is valid in this situation. We say it seems, because there may be other factors that might also make the second will invalid: we don’t have all the facts.

The lesson from this article is that when it comes to wills, trusts and estate plans, the formalities really do matter. Procedures and formalities are considered more important than intent.

Another story that illustrates that point comes from an attorney who was involved in an estate matter where the person who made the will tried to take out several beneficiaries, by taking a razor blade to the document and physically removing their names from the will. The estate battle began after he died. The intention was clear—to remove the beneficiaries from the will. However, because the proper formalities were not followed, the beneficiaries were not properly removed from the will and they received their bequests after all.

If you have a will and estate plan and you wish to make changes to it, sit down with an estate planning attorney to discuss the changes you want to make, and have the documents properly revised, following all the required steps. Don’t try to do this yourself: your wishes may not be followed otherwise.

Reference : nwi.com (March 10, 2019) “Estate Planning: Will formalities are important”

Smart Women Protect Themselves with Estate Planning

Sat, 30 Mar 2019 13:12:00 GMT

“Since women live approximately 4.9 more years than men, it is critical for both single and married women, regardless of age, to take estate planning seriously.”

Here are some action items to consider, when putting your estate plan in place:

If you have an estate plan but aren’t really sure what’s in it, it’s time to get those questions answered. Make sure that you understand everything. Don’t be intimidated by the legal language: ask questions and keep asking until you fully understand the documents.

If you have not reviewed your estate plan in three or four years, it’s time for a review. There have been new tax laws that may have changed the outcomes from your estate plan. Anytime there is a big change in the law or in your life, it’s time for a review. Triggering events include births, deaths, marriages, and divorces, purchases of a home or a business or a major change in financial status, good or bad.

If you don’t have an estate plan, stop postponing and make an appointment with an estate planning attorney, as soon as possible.

Your estate plan should include advance directives, including a Durable Power of Attorney, Health Care Surrogate, and a Living Will. You may not be capable of executing these documents during a health emergency and having them in place will make it possible for those you name to make decisions on your behalf.

Anyone who is over the age of 18, needs to have these same documents in place. Parents do not have a legal right to make any decisions or obtain medical information about their children, once they celebrate their 18 ^th birthday.

Make a list of your trusted professionals: your estate planning attorney, CPA, financial advisor, your insurance agent and anyone else your executor will need to contact.

Tell your family where this list is located. Don’t ask them to go on a scavenger hunt, while they are grieving your loss.

List all your assets. You should include where they are located, account numbers, contact phone numbers, etc. Tell your family that this list exists and where to find it.

If you have assets with primary beneficiaries, make sure that they also have contingent beneficiaries.

If you have assets from a first marriage and remarry, be smart and have a prenuptial agreement drafted that aligns with a new estate plan.

If you have children and assets from a first marriage and want to make sure that they continue to be your heirs, work with an estate planning attorney to determine the best way to make this happen. You may need a will, or you may simply need to have your children become the primary beneficiaries on certain accounts. A trust may be needed. Your estate planning attorney will know the best strategy for your situation.

If you own a business, make sure you have a plan for what will happen to that business, if you become incapacitated or die unexpectedly. Who will run the business, who will own it and should it be sold? Consider what you’d like to happen for long-standing employees and clients.

Smart women make plans for themselves and their loved ones. An estate planning attorney will be able to help you navigate through an estate plan. Remember that an estate plan needs upkeep on a regular basis.

Reference : Boca Newspaper (March 4, 2019) “Smart Tips for Women: Estate Planning”

Create a Legacy with your Estate

Sun, 24 Mar 2019 13:15:00 GMT

"Worry a little bit every day and in a lifetime you will lose a couple of years. If something is wrong, fix it if you can. But train yourself not worry; Worry never fixes anything."

The Bernice Dickson Family heard this and raised Hemingway one big leap. Ms. Dickson did not worry, she sprang into action, creating a museum from the now famous property in Key West, Florida. http://www.placesaroundflorida.com/Key_West_Florida/Ernest_Hemingway_House/

There are a number of ways to create a plan that provides a legacy. The Dickson Family had quite an undertaking with the property. Your needs may not be quite so complicated. But if you have a pet, no matter how many toes, your estate plan may provide for them. Consider your needs and the options become clear when you sit down with your estate planning attorney.

Choose a Plan

You might create a Living Trust, either revocable or irrevocable. Perhaps you'd like to set up a corporate entity, perhaps a not-for-profit entity with people on board who you trust to carry on. You might need something a bit less complicated to assure your property is passed on to the charity of your choice after you and your spouse pass on. Consider a properly drafted will with your attorney. A will can be far more than a risky generic form with typed in answers and your signature. A will may contain a testamentary trust that springs into life after your passing.

In fact; your will might contain more than one testamentary trust depending on the needs.

As mentioned, you might find this to be a violable option for a small estate with property to direct beyond family members to benefit a charity. To direct the care of a pet after you pass. It is also a means to direct life insurance proceeds.

Make an appointment with your estate planning professional to discuss how your assets may be safely tucked into the category of legacy with a firm estate plan.

No more worrying, plenty of action.

Social Security and Divorce

Tue, 19 Mar 2019 13:18:00 GMT

“Did you know Social Security spousal benefits extend to certain ex-spouses who have gotten divorced?”

Almost 70% of unmarried retired Americans and nearly 50% of married retired Americans count on Social Security benefits for half or more of their income, reports Yahoo! Finance in the article “3 Things to Know About Social Security if You’re Divorced.” Anyone facing retirement, especially if they are single, needs to know as much as possible about Social Security benefits and what they are entitled to receive.

Bear in mind that many people elect not to start collecting benefits, until long after they turn 62. There are good reasons for this. For every year that people delay taking their Social Security benefits from between age 62–70, they’ll receive roughly 8% more in their monthly check. If you expect to live a long time, the longer you can delay claiming benefits, the better.

Full Retirement Age (FRA) has changed, and now you won’t reach FRA, until sometime between the ages of 65 (if you were born in 1937 or before then) to 67 (for anyone born in 1960 and later).

Remember, it doesn’t matter if your ex has begun taking Social Security benefits — just whether they are eligible to do so. Your ex-spouse’s marital status doesn’t matter either. They might be remarried, divorced, widowed, etc. That doesn’t have any bearing on your ability to file a claim, or the amount of the claim. Your claim won’t have any impact on your ex’s benefits or their new married partner’s benefits.

What does matter: if your ex has not yet applied for Social Security benefits, there is a requirement that you need to have been divorced for at least two years, before you can receive the spousal benefit.

Here are three key things you need to know about filing for Social Security if you’re divorced:

How can you find out what your benefits would be, and what your spousal benefits would be? To receive Social Security, you need a work history that earns a total of 40 lifetime work credits. This is based on income and time. Four work credits are the most you can earn in one year, even if you are earning millions. Once you qualify, an earnings history kicks in to determine the amount you are entitled to. The benefits are calculated on the 35 highest-income, inflation-adjusted years. If you’ve worked fewer than 35 years, $0 is averaged into the monthly payout calculation for every year under the 35 years.

Spousal benefits are determined by computing your work and earnings history and your ex’s work history and salary history. If you are qualified for a spousal benefit, the benefit is 50% of your ex’s FRA, if you began taking benefits at your FRA. Let’s say your ex is eligible for $2,000 a month in Social Security benefits. You’d get $1,000. If your ex delays receiving Social Security benefits past their FRA, the increasing amount is not applied to your spousal benefit.

If you have a healthy work and earnings history of your own, the Social Security Administration will pay your own retirement first, and then compute your potential benefit from your ex’s work and earnings history. With that information, the SSA will adjust the benefit to ensure that you receive the higher amount.

Here’s a way to max out your Social Security benefit, if you meet the requirements to do this: take just the benefit for yourself as a divorced spouse and delay taking your own. That way, you can receive that 8% annual hike in your benefit. However, if your birthday is Jan. 2, 1954 or later, that option is phased out.

Reference: Yahoo! Finance (Feb. 16, 2019) “3 Things to Know About Social Security if You’re Divorced”

Using Trusts to Maintain Control of Inheritances

Fri, 15 Mar 2019 13:20:00 GMT

“Why would you leave an inheritance to a trust for a beneficiary rather than “outright” to the beneficiary? The answer is control and so many more options”

Trusts, like estate plans, are not just for the wealthy. They are used to provide control, in how assets of any size are passed to another person. Leaving an inheritance to a beneficiary in a trust, according to the article from Times Herald-Record titled “Leaving inheritances to trusts puts you in control,” can protect the inheritance and the asset from being mishandled. Also, a trust can prevent an inheritance from harming a beneficiary in more ways than you first imagine.

For many parents, the inheritance equation is simple. They leave their estate to their children “per stirpes,” which in Latin translates to “by roots.” In other words, the assets are left to children according to the roots of the family tree. The assets go to the children, but if they predecease you, the assets go to their children. The assets remain in the family. If the child dies after the parent, they leave the inheritance to their spouse.

This is also a good way for parents, who are concerned about the impact of their wealth on their children, to maintain some degree of control. One strategy is a graduated payment plan. A certain amount of money is given to the child at certain ages, often 20% when they reach 35, half of the remainder at age 40 and the balance at age 45. Until distributions are made to the heirs, a trustee may use the money for the person’s benefit at the trustee’s discretion. Traffic controls to keep all of the funds from flowing through at once.

The main concern for many is that money not be wasted by spendthrift heirs. In that situation, a spendthrift trust restricts payments to or for the beneficiary and may only be used at the trustee’s discretion. A lavish lifestyle won’t be funded by the trust.

However, there are many other important reasons to insert lasting controls. If money is being left to a disabled individual who receives government benefits , like Medicaid or Supplemental Security Income (SSI), you may need a Special Needs Trust . The trustee can pay for services or items for the beneficiary directly, without affecting government benefits. The beneficiary may not receive any money directly.

If an older person is a beneficiary, you also have the option to leave them an “income only trust.” They have no right to receive any of the trust’s principal. If the beneficiary requires nursing home care and must apply for Medicaid, the principal is protected from nursing home costs.

An estate planning attorney will be able to review your family’s situation and determine which type of trust would be best for your family.

Reference : Times Herald-Record (Feb. 16, 2019) “Leaving inheritances to trusts puts you in control”

A Love Letter to Your Family

Sun, 10 Mar 2019 13:22:00 GMT

“If you are among the 30% of adult Americans who have prepared an estate plan, congratulations. By taking the steps needed to create a plan that is unique to your needs, you are ensuring that your goals for the future will be achieved and the people you wish to benefit will not be forgotten.”

Now, to the 70% of Americans who do not have an estate plan, the article “Senior Spotlight: Composing the ‘family love letter’” from the Lockport Journal should help you understand why this is so important. One reason why people don’t take care of this simple task, is because they don’t fully understand why estate planning is needed. They think it’s only for the wealthy, or that it’s only for old people, or even that it’s only about death and taxes.

Some of the main elements of an estate plan are to create and execute documents that provide for incapacity and death, as well as provide information about your assets, liabilities and wishes.

You’ve spent a lifetime accumulating assets. It is now time to sit down with family members and have a heart-to-heart talk about the details of the estate and what your intentions are with respect to its distribution. The subject of death can be challenging for all. However, discussing your estate plan is vital, if you want to protect your family from what might come after you are gone. Each family has its own goals, so it’s a good idea to talk about it frankly, while you still can.

Without discussions and an estate, the chances of a family split, assets not going where you had intended and unnecessarily higher costs in taxes and legal fees, are a very real possibility.

If speaking about these topics is too hard, you may want to write your family a love letter. It would contain all the information that your family would need at the time of your death or if you become incapacitated because of illness or injury.

Your estate plan should also include the documents needed, so your family can make decisions on your behalf, if you are incapacitated. That includes a power of attorney, a health care directive and may include others specific to your situation.

Ideally, all this information will be located in one convenient place. Don’t put it on a computer where you use a password. If the family cannot access your computer, all your hard work will be useless to them. Put it in a folder or a notebook, that is clearly labeled and tell family members where it is.

They’ll need this information:

Think of these materials and discussions as your opportunity to make a statement for the future generation. If you don’t have an estate plan in place already or if you have not reviewed your estate plan in more than a few years, it’s time to make an appointment for a review. Your life may have not changed, but tax laws have, and you’ll want to be sure your estate is not entangled in old strategies that no longer benefit your family.

Reference : Lockport Journal (Feb. 16, 2019) “Senior Spotlight: Composing the ‘family love letter’”

Bored in Retirement? Find Your Essential Self, For Starters

Thu, 07 Mar 2019 13:24:00 GMT

“Seventy-eight million strong and hitting this artificial finish line of 65 at the rate of 10,000 per day, boomers everywhere are beginning to discover that retirement, as we’ve known it for decades, needs redefining.”

A study from the Federal Reserve in 2016 found that a third of retirees eventually consider retirement and return to work, some on a full-time and others on a part-time basis. Another study from the Rand Corporation, found that 39% of workers 65 or older who were employed had tried retirement, but didn’t care for it and decided to go back to work.

What’s behind this trend? Some of it has to do with a focus on the financial side of retirement, leaving out the planning for what life in retirement will look like. It turns out that the “soft-side” of retirement requires just as much planning as the money part.

Here’s the sad thing: the first part of retirement is usually when people are at their physical and mental best. Spending five to 10 years figuring out the mental, physical, social and spiritual challenges of retirement that could have been discussed, explored, and planned while still working, is too much time to lose at this later stage of life.

Some key issues:

How to undo the “bored boomer” syndrome?

Find your “essential self.” What did you love when you were 6, 8 or 10 years old? What did you want to do, before parents, schools and financial obligations got in the way? Bored boomers can redefine who they are and what their greater purpose is. What is your essential self? What are you passionate about? What skills can you use to bring about greater good?

Reintegrate yourself. You have decades of experience, skills, insight and knowledge. What could your second career do to combine all of this with your essential self?

Start a lifestyle business. What does that mean? A lifestyle business is a business that gives you a level of income, freedom to work when and where you want and is not set in any physical location. That includes coaching and consulting, services like web design or graphic services, freelancing sales in your prior industry, etc.

Retirement hasn’t been about playing shuffleboard and taking naps for a while. However, expect it to change even more in the coming decades, as boomers transform this next phase of their lives.

Reference: Next Avenue (Feb. 5, 2019) “How to Avoid Becoming a ‘Bored Boomer’ in Retirement”

Are You Retiring in 2019? Here’s What You Need to Know

Tue, 05 Mar 2019 13:28:00 GMT

“After putting in several decades of hard work so you could retire comfortably, it’s finally time to pull the plug. As you begin to set your retirement dreams in motion, hold on. It’s not quite time to unwind just yet.”

There’s detailed planning, organization of documents, and additional financial details that need attending. You may also want to start creating your “bucket list” — a list of things you’ve always wanted to do, but never had the time to do while you were working. Getting all of this in order, will speed your waiting time and prepare you better, when the last day of your working life does finally arrive.

Whether you are three months or six months from retirement, here are some tips for your to-do list:

Social Security . Figure out when the best time for you to take Social Security benefits will be. Can you delay it until age 70? That’s when you’ll get the biggest payout. The earlier you start collecting benefits, the smaller your monthly check will be. Take it early, and you are locked in to this lower rate.

Health Care . Figuring out how to manage health care costs, is the single biggest worry of retirement for most Americans. An injury that puts you in a nursing care facility can make a huge dent in your retirement funds, even if it’s just for a short while. This is the time of your life, when focusing on your health is most important, even if you’ve been careless in earlier decades. Evaluate your health status and get check ups with your regular physician and your dentist.

Investments. Check with your HR department about when you’ll need to roll over your 401(k) plan. If you transfer the funds into a low-cost IRA, you may save in fees. Work with your financial advisor to determine what your withdrawal rate will be. You may need to reevaluate some of your retirement goals or consider working part time during retirement for a few years.

Medicare. If you’re almost 65, you can start enrolling in Medicare now. The government lets you start the process within three months of your 65 ^th birthday. Start this process, so you are covered, once you are not on the company’s health care plan.

Expectations. The first six months to a year of retirement can be both wonderful and terrible. While enjoying freedom, many people find it hard to withdraw money from the same accounts they spent so many years building. What if they don’t have enough for a long life? Take a realistic look at your lifestyle, budget, and spending habits, before you retire to make sure you are financially ready to do so. If you think you might work part time, look into the positions that are available in your area and what they pay.

Lifestyle. Often, we are so busy planning for the financial side of retirement, that we forget to plan for the “soft” side: what will you do in retirement? Will you volunteer with an organization that has meaning for you? Write the novel you’ve started on a dozen times? Spend more time with your grandchildren? Travel? What will make you feel like your time is being well-spent, and what will make you fulfilled?

Don’t forget the legal plan. Retired or not, you need to have a will, power of attorney, and health care power of attorney to protect your family, whether you are preparing for retirement or in the middle of your career. Speak with an estate planning attorney to ensure that these important documents are in place.

Reference: Next Avenue (March 6, 2019) “Tips to Prepare for Retiring This Spring or Summer”

Moving to a Care Community? Check the Fine Print

Mon, 04 Mar 2019 13:29:00 GMT

“When you have finally decided to move from home to a senior retirement community that has levels of care—or when moving to a personal care/assisted living community—you and your family might not be in the mood to read legal agreements.”

If you don’t want to read the fine print or can’t make head or tails of what you are reading, one option is to ask your estate planning attorney to do so. Without someone reading through and understanding the contract, you and your family may be in for some unpleasant surprises. Here are some things to consider.

What kind of a community are you moving into? If you are moving to a Continuing Care or Life Care Community, your documents will probably have provisions regarding health insurance, entry fees, deposits, a schedule of costs, if you need additional services, fees for moving to a higher level of care and provisions for refunds and estate planning.

When you enter an Assisted Living facility, which may have other names such as it is referred to as “Personal Care” in Pennsylvania, you may find yourself signing documents regarding everything from laundry policies, pharmacy choices, financial disclosures and statements of your rights as a resident. Not every document you sign will be critical, but you should understand everything you sign.

If moving into a nursing home that accepts Medicaid, you and your family need to know that nursing homes that accept Medicaid are not permitted to demand payment on admission from either an adult child or a power of attorney from their own funds. However, Pennsylvania does have support provisions regarding children, that are called “filial responsibility.” This should not be a problem, as long as you speak with an elder law attorney who can make sure you have completed the Medicaid application correctly and are in full compliance with all of the requirements.

If your adult children ask you to sign documents and “don’t worry” about what documents are, you may want to sit down with an attorney to review the documents. When someone is not trained to review these documents, they won’t know what red flags to look for.

If someone signs the document who is not the applicant/future resident, that person may become responsible for the costs, depending upon what role you have when you sign: are you a guarantor or indemnitor? That person typically agrees to pay after the applicant/resident’s funds are exhausted. The payments may have to come from their own funds. Sometimes the “responsible party” is simply the person who handles business matters on the applicant’s behalf. You’ll want to be sure that the person signing the papers understands what they are agreeing to.

Almost all agreements will say that the applicant, or the person receiving services, is responsible for payment from their own assets. However, if someone signing the documents is power of attorney, they need to be mindful of what they are signing up for.

If possible, the person who will receive services should be the one who signs any paperwork, but only after a thorough review from an experienced attorney.

Reference : Delco Times (Feb. 5, 20-19) “Planning Ahead: Moving to a care community? Read the agreement”

Break the Cinderella Stereotype and Be a Savvy Stepmother

Wed, 27 Feb 2019 13:31:00 GMT

“Now that just a third of American households are “traditional” (heterosexual, married, with children), estate planners and advisors need to raise new questions with their clients and offer new solutions.”

It isn't a surprise, widows, widowers and divorcees often marry again later in life. Whether this is a May-December relationship raising the hackles of nearby kin or not, there is something you can do bring down the temperature in the room and just plain get ahead of family relationship issues.

The stepmother did not want to be seen as rapacious or coming between the kids and their inheritance.

The solution was as follows: money for the stepmother was left to a marital trust with provisions for her benefit, while the children received accelerated inheritances through a series of Grantor Retained Annuity Trusts (GRATs), a qualified personal residence trust for a vacation compound and annual exclusion gifts.

Here’s another example: a male descendent of a wealthy family acknowledged that he had fathered a child without being married to the child’s mother. He had to seek legal determination to ensure that the child would be cared for.

Welcome to today’s new family. They include three-parent families, artificial reproductive heirs and blended families. These are all hot issues in the world of estate planning and attorneys are now addressing these new dynamics.

There are five basic questions that must be addressed when creating an estate plan today:

Who? Who gets your money and your stuff?

How much? How will it be divided among heirs?

When? Will it be at a specific age, or just when you die?

Outright versus in trust? With a trustee, you name a person who will control your assets.

Who represents you? An agent and a fiduciary, with a power of attorney who acts on your behalf, if you become incapacitated, an executor who is in charge of administering your estate, and a trustee who manages any trusts created.

Modern families don’t want old-school estate planning solutions. They want to know that their estate plan will work for their situation, which may not match the old “Mom, Dad, Brother, Sister, Brother” construct. So, how should you handle the distribution of wealth for non-traditional families? If a child dies, and a live-in partner is rearing the children, should there be money for the children in a trust? What about taking care of the surviving partner, even if they were not married?

What about late-in-life marriages? If there’s a huge gap in years between grandparents and grandchildren, how will family wealth be passed down? Funding 529 trusts is one answer, and trusts are another. If the age gap is so big that grandparents never meet their grandchildren, a statement of intent in documents can be used to convey the goals and wishes the grandparents have for their grandchildren.

Providing for all children equally isn’t always the goal of the modern family. Some might think their ex-spouse will provide for children and leave them fewer assets than they would have, if that were not a factor. However, don’t assume that, even if you can’t have that conversation with your ex. If your intention is to distribute assets in unequal portions, you may save your loved ones a lot of pain and fighting, by either talking with them about it while you are still living or leaving a letter behind explaining your decision-making process.

It’s hard to tell what changes will come to families in the future, but one thing will remain the same: the need for an estate plan, done with the guidance of an experienced estate planning attorney, is essential.

Reference: Forbes (Jan. 29, 2019) “How Long Will Stepmom Live? And Other Vexing Estate Planning Questions for Modern Families”

Does Anyone Really Need a Trust? The Romans did.

Sat, 23 Feb 2019 13:32:00 GMT

“The use of trusts in estate planning goes back to ancient Rome (and they got by without cell phones). Roman inheritance law crucially affected strategies of succession open to testators. To understand whether you need a trust as we know it today, requires a basic understanding of what a trust is and how it works.”

That is accurately described by the Pittsburgh Post-Gazette in the article titled “Do I need a trust?”

Trusts are created by the preparation of a trust document by an estate planning attorney. The trust can be made to take effect while the Trustor is alive — referred to as inter vivos — or after the person’s death — testamentary.

The document can be irrevocable, meaning it can never be changed, or revocable, which means it can change from one type of trust to another, under certain circumstances.

Whether you even need a trust, has nothing to do with your level of assets. People work with estate planning attorneys to create trusts for many different reasons. Here are a few:

There is considerable misinformation about trusts and how they are used. Let’s debunk a few myths:

An irrevocable trust means I can’t ever change anything. Ever. Even with an irrevocable trust, the settlor typically reserves options to control trust assets. It depends upon how the trust is prepared. That may include, depending upon the state, the right to receive distributions of principal and income, the right to distribute money from the trust to third parties at any time and the right to buy and sell real estate owned by the trust, among others. Depending upon where you live, you may be able to “decant” a trust into another trust. Ask your estate planning attorney, if this is an option.

I don’t have enough assets to need a trust. This is not necessarily so. Many of today’s retirees have six figure retirement accounts, while their parents and grandparents didn’t usually have that much saved. They had pensions, which were controlled by their employers. Today’s worker owns more assets with complex tax issues.

You don’t have to be a descendent of an ancient Roman family to need a trust. You must just have enough factors that makes it worthwhile doing. Talk with your estate planning attorney to find out if you need a trust. While you’re at it, make sure your estate plan is up to date. If you don’t have an estate plan, there’s no time like the present to tackle this necessary personal responsibility.

Reference: Pittsburgh Post-Gazette (Jan. 28, 2019) “Do I need a trust?”

Why Can’t My Husband Go to the Doctor to Help Me?

Thu, 21 Feb 2019 13:34:00 GMT

“I am frustrated that I can’t send my husband to my doctor’s office to pick up a prescription or get information from my files!”

It seems illogical that the person who is named as another person’s agent under an Advanced Care Directive can’t take on these tasks, says the Monterey Herald in the article “Senior Advocate: Can my health care agent help me now?” After all, if they can make decisions for you when you’re incapacitated, why can’t they do something as simple as get a copy of your medical records for a second opinion?

However, usually the Advance Health Care Directive isn’t the document that gives someone access to all of your medical information. The Advance Health Care Directive is usually the document that gives your named agent the power to make decisions about end-of-life or life-saving decisions. It’s the document that is used if a decision must be made about taking a person off of a respirator or a heart machine.

If you want to give someone the ability to run health-related errands for you or speak with your healthcare providers, it is possible to have an Advanced Health Care Directive prepared in a different way, so it becomes immediately effective, regardless of your capacity. This can be used to give a spouse the ability to have access to all your medical records and information.

If you are ill and want to have your spouse involved in your medical care, even if you are not incapacitated, the “effective immediately” option will let your spouse act on your behalf. You won’t have to wait for a physician to state that you are incapacitated, before an Advanced Directive can take effect.

Since an Advance Directive usually names an alternate agent, you can have the document prepared so your spouse is able to be effective anytime, but the alternate agent can be limited to when your spouse is not able to help, and you are unable to speak for yourself because you have become incapacitated.

Keep in mind that the Advance Directive, whether effective immediately or only upon incapacity, has nothing to do with your finances. That requires a different document, or documents, depending upon your estate plan and your unique situation.

An estate planning attorney will be able to craft Power of Attorney documents for finances, trusts or other assets. All these documents should be prepared, while you are still competent to understand how the documents work and what powers they give to your spouse or another named agent.

Reference: Monterey Herald (Dec. 22, 2018) “Senior Advocate: Can my health care agent help me now?”

Downsizing Boomers Find Help from Senior Move Management Companies

Sun, 17 Feb 2019 13:35:00 GMT

“A growing number of senior management companies assist with the overwhelming task.”

As reported in Columbus CEO’s article “ Estate Planning and Retirement: How to Downsize Like a Diva,” Schulman and her team at A Moving Experience take the work and worry out of a move, so seniors can focus on the emotional challenges that come with this kind of move. When people are not at their physical best, downsizing can be extremely upsetting. It can get to the point, where many people wait until the very last minute and then panic sets in.

Her company is one of many senior move management companies that help seniors with this transition. The companies organize possessions, create a floor plan for new residences, schedule and oversee moving companies, handle any sales or donations of items that are no longer needed or wanted and even pack and unpack after the move.

What’s just as important: they provide the seniors with the emotional support needed during a very trying time. It’s not easy to be faced with the reality that they must leave their home after decades or even a lifetime. Equally upsetting: coming to terms with the limitations of aging.

Children and family members may not be as sensitive to their parent’s emotions about a move like this, or they may be equally uncomfortable. Having a non-family professional may serve as a buffer and a facilitator for everyone.

The increase in the number of these types of companies is due to the enormous number of Baby Boomers entering retirement. Most will be downsizing, as they leave one-family homes and move to smaller living spaces. With 10,000 turning 65 everyday, a projected 79 million Americans will be 65 or older by 2030. Clearly, aging is a big business.

Senior moving management charges range in pricing from $40 to $120 per person nationwide, with the average price for help costing around $3,000, plus the charge of the moving company.

The money is considered well-spent by many. One family called on a senior moving company, when their mother had to leave her long-time home in one state and relocate to an independent senior living community near family members in another state. The siblings reported that they needed help from someone who would be patient and understand the process their mother was going through. The senior mover worked to make the new home layout, as close to the mother’s original house as possible.

Nonprofit organizations are also getting involved in helping seniors move, with several agencies helping seniors, who can’t afford the services of a private company.

Reference : Columbus CEO (Jan. 21, 2019) “ Estate Planning and Retirement: How to Downsize Like a Diva”

How Would Cinderella’s Story Be Different, if Dad Did Estate Planning?

Sun, 10 Feb 2019 13:36:00 GMT

“Ah, the tale of Cinderella, a classic childhood favorite. We all know it as the story of an orphan who is mistreated by her Evil Stepmother and, with the help of her Fairy Godmother, wins over the heart of Prince Charming.”

To refresh your memory: Cinderella’s mother died, her father remarried and then he died. She is basically a slave to her evil stepmother and stepsisters, in her own home.

Let’s start with what would happen, if there had been no estate plan. If the family lived in Arizona, half of her father’s estate would go to her stepmother, and half of the estate would be given to Cinderella. As a minor, her half of the estate would be placed in an UTMA account–Uniform Transfers to Minors Act. There would be a court-appointed custodian, who would be required to use these funds for her health, education, maintenance and support. The court would have likely appointed the Evil Stepmother, who would not likely have complied with the guidelines. A second option would have been for the money to be placed in a trust for Cinderella’s benefit, but the Evil Stepmother would likely have been named a trustee, and that would not have worked out well either.

What Cinderella’s father should have done, was to create a Revocable Living Trust Agreement, stating that certain assets are the separate property of the father (Schedule A), that certain assets are the property of the Evil Stepmother (Schedule B) and that certain assets are community property of the father and the Evil Stepmother (Schedule C).

A neutral successor trustee would have been named—a friend, fiduciary, corporate trustee or perhaps the Fairy Godmother—to oversee the trust. At the death of the father, the trust should have directed that the trust be divided into two subtrusts, known as an A/B split trust.

The Survivor’s Trust (Trust A) would have gathered all the Evil Stepmother’s separate property and one half of the value of the community property assets. Trust B (The Decedent’s Trust) would have all of the father’s separate property, as well as half the value of the community property assets. The trust could have been structured, so that the Evil Stepmother could use the Survivor’s Trust assets as she wanted and could only receive income, if the assets to the Survivor’s Trusts were depleted.

The neutral successor trustee would either work with the Evil Stepmother or make sure that Cinderella’s share of the Decedent’s Trust was not being improperly depleted. At the death of the Evil Stepmother, the assets in the Decedent’s Trust would go to Cinderella.

Cinderella’s father could have also taken out a large life insurance policy to ensure that she was cared for, with the proceeds to be distributed to an UTMA account, with a neutral custodian or to a support trust with a neutral trustee.

The only way Cinderella could have recovered any assets would have been through litigation, which is the likely way this story would have turned out, if it happened today. It’s not ideal, but if a child has been left with nothing but an Evil Stepmother and two nasty stepsisters, a lawsuit is a worthwhile effort to recover some assets. Assuming that the Evil Stepmother either adopted Cinderella or was appointed her guardian by the court, there would be a fiduciary obligation to protect her, and an accounting of assets at the time of her father’s death would have been prepared.

Estate planning would have preempted the story of Cinderella. It does serve as a clear example of what can happen with no estate plan in place. Whether your blended family enjoys a great relationship or not, have your estate plan created, so that if things turn wicked, your beloved children will be protected.

Reference: The National Law Review (Jan. 16, 2019) “A Cautionary Fairy-Tale–If Only Cinderella’s Father Had An Estate Plan”

Estate Planning? Let's Talk About Your Life Insurance Policy

Thu, 07 Feb 2019 13:38:00 GMT

“The Tax Cuts and Jobs Act of 2018 (TCJA) put in place a variety of changes to both individual and business tax structures.”

Increases in the estate tax exemption has an impact on how some people are thinking about life insurance, says ThinkAdvisor in the article “Estate Planning Is Still Important.” However, before making any changes, consider the larger picture and think long, not short, term.

Remember the new higher estate tax exemption is federal. Your heirs may still have state estate taxes and inheritance taxes, depending upon where you live. Having an insurance policy will still help with the costs of settling an estate and paying any taxes that are due.

The new tax exemption also has a sunset date. The year 2026 may seem far away. However, it will arrive, while we are busy with our lives. It may be much harder and more expensive for an individual to purchase a life insurance policy in 2026 than it is right now.

If someone is very old or in ill health, they have a different window of time for planning. However, if you are in your middle years or relatively healthy, now is not the time to put off purchasing life insurance or to let an existing policy lapse.

We know that political landscapes change. If they do, and you want to buy a policy, there may be additional obstacles in the future.

Life insurance also serves as a tool for your estate. If your estate plan seeks to distribute an inheritance equally from assets in a traditional IRA, life insurance can become an equalizer. Let’s say one child is in a much higher tax bracket than the others. Upon receiving the IRA, they will have to pay more in taxes than the others. The child in the lower bracket will end up with a larger sum of money, having lower taxes on their inheritance. This could lead to sibling arguments, which are not uncommon when brothers and sisters become heirs. The insurance policy proceeds can be used to make up the difference.

Another point to consider is who owns the insurance policy? If it is owned by a trust, you may not have the legal right to make a change. If the trustee does not agree that the policy should be liquidated or cancelled, they may not allow the change to go forward.

Your estate planning attorney will be able to review your life insurance policies, when she reviews your overall estate plan. Each part of an estate plan works best, when all parts work in concert.

Reference: ThinkAdvisor (Jan. 11, 2019) “Estate Planning Is Still Important”

Self Employed People Get to Retire Too–If they Plan Well

Sat, 02 Feb 2019 13:39:00 GMT

“You’ve worked hard to build your own business, and you love the perk of being your own boss. However, going solo does come with one big challenge: It can be tough to save enough for retirement.”

Here are some tips for self-employed people who are concerned with building their retirement savings.

Embrace a budget. One of the biggest challenges is income that fluctuates. It’s hard to save when one month has you earning $10,000 and $3,000 the next month. You’ll need to create a budget and stick with it, including budgeting a percentage of your income for retirement. While you’re creating a budget, set goals for short- and long-term objectives to keep your budgeting focused.

A budget should include necessary expenses for each month, including mortgage or rent, car loans and credit card payments. Include groceries, transportation, and health care costs. Some self-employed people pay for some items like transportation or entertainment out of their business accounts. If you do that, just work with one budget, so you can measure spending. There is no need to split things out for yourself. You should then look at discretionary items like vacations, entertainment, gym memberships, clothing and things that are not basic necessities.

Now see what’s left at the end of the month. If there’s no regular stream of money going into retirement savings because there’s not enough after spending, you may need to make some changes.

Create an item in your expense budget for retirement savings. Make it automatic. Set a fixed amount of your income, by dollar amount or percentage of monthly income, and put it away every month for your retirement. This takes discipline at first and then becomes a habit. Once you see how the account grows, you’ll be more inclined to continue.

Talk with your accountant about the best savings vehicle for you. Some self-employed individuals use a “solo” 401(k) account, known as a SEP or Self-Employed 401(k). Designed for employers who have no employees other than themselves (or their spouses), it offers the same benefits as traditional 401(k)s. In 2019, you can contribute up to $19,000 when contributing as an employee , or up to $24,500 if you are 50 and older. As an employer , you can contribute up to 25% of your compensation – not counting catch-up contributions for those 50 and older, you can go as high as $55,000 in 2019.

Another factor if you are self-employed is your estate plan. Entrepreneurs are often so busy working on their business, that they forget about the legal side of their personal lives. You need a will, power of attorney, health care power of attorney and, depending on your business and life situation, a succession plan.

Reference: Zing! (Jan. 7, 2019) “Saving for Retirement When You’re Self-Employed? It Takes Planning and Commitment”

Grey Divorces Will Get More Challenging in 2019

Wed, 30 Jan 2019 13:41:00 GMT

“As if dividing up assets wasn’t difficult enough, new tax changes taking effect in January 2019 could add a significant amount of stress to divorces after this year.”

Here are the four key changes:

Alimony paid will no longer be tax-deductible, and alimony received will no longer be treated as taxable income. For decades, alimony has been tax deductible for the person paying it and taxable as income for the person receiving it. Expectations are that the federal government will benefit by as much as $6.9 billion over the next 10 years. Other expectations are that high-income divorcing spouses will fight more aggressively to pay less in alimony, since it is no longer a deduction. Smaller alimony payments may be a result. In addition, legal fees paid to secure alimony will no longer be deductible.

If your divorce is modified in 2019, you might be subject to this new rule. If you are already divorced, you’ll be governed by the old rules. However, be careful of any divorce modifications in 2019.

Pre- and post-nuptials may change also. Certain agreements may be nullified under the new law.

Children won’t be a tax deduction. The 2017 tax law eliminated the $4,050 exemption for each dependent until 2025. On the other hand, the child tax credit has doubled from $1,000 to $2,000.

For those who are facing divorce in the year to come, be aware that your attorney, your spouse and you need to work together if possible, to minimize the tax liabilities that may be created in the divorce.

If you are the spouse with the higher income, consider trading an IRA account to your lower earning spouse, because that shifts the tax burden to the IRA owner, when they start taking distributions. If you are the lower-earning spouse, understand that unless it’s a Roth IRA, you will have to pay taxes on distributions.

If possible, delay the divorce until others have navigated the new rules. It takes time for attorneys and financial advisors to get up to speed, when there are large changes in the law. By mid-year or later, the professionals who guide you along this journey may have strategies they did not have in the early part of the year.

Don’t neglect to address how your grey divorce will impact your retirement, retirement finances and your estate plan. Speak with your estate planning attorney so he or she is aware of these changes and learn when you should start updating your estate plan.

Reference: Next Avenue (Dec. 4, 2018) “How the Tax Laws for Divorce Will Turn Upside Down in 2019”

How to Protect Your Elderly Loved Ones from Telephone Scammers

Sun, 27 Jan 2019 13:49:00 GMT

“When a man claiming to be a Suffolk cop called Rosemarie O’Rourke and said her grandson was in big trouble, she'd been grieving the death of her husband two days earlier—an easy target for a scam artist.”

She was told that her grandson had been arrested and charged with possession of illegal drugs. To get him out of prison, the caller directed her to buy $8,000 in gift cards from a national electronics store. Frightened, the woman did as she was instructed, and gave the man the personal identification numbers on the cards when the man called her back.

Only afterwards did she realize that the man had gotten her name and her grandson’s name from her husband’s obituary. Embarrassed by her failure to realize it was a scam, she decided to speak out in the hopes it would prevent another vulnerable senior from falling victim.

Seniors are being warned to be wary of these kinds of con artists. Unfortunately, the scams are successful and that’s why they continue. Swindlers typically call victims and tell them they must take action immediately, or something very bad will happen. They sound like they mean business, and often the phone numbers that appear on the screen seem to be from a government agency. The phone numbers have been “spoofed”—altered to appear to come from a legitimate place. However, it’s all a scam.

Authorities say that many victims who are targeted are elderly, because they may not be aware of how much detailed information can now be obtained by strangers. When the caller uses their name, or names of other family members, the victim believes the call is from a legitimate agency.

What to do? Have a conversation with the elders in your life. Make it frank with a written list of likely scams for them to place next to the telephone. Include what information they should write down from the caller and suggest a savvy trusted family member or two who they can call to discuss these calls. Talking to someone will help them sort it out when they are not sure if it a real need or a scam.

Here are a few key point for your list:

Reference: Newsday (Jan. 4, 2019) “Nassau, Suffolk police warn of phone scammers posing as officials”

Is Your IRA Safe from Bankruptcy Claims?

Thu, 24 Jan 2019 13:50:00 GMT

“If you think that personal bankruptcy is a real possibility in your future, understanding IRA bankruptcy protection can potentially save a significant portion of your net worth, as well as unnecessary taxation from premature distributions.”

There are some protections in place for IRAs in the face of bankruptcy, says The Balance in the article “What is IRA Bankruptcy Protection?” The protection from the federal government extends to personal IRAs and Roth IRAs, but there are some limitations.

Today, IRA bankruptcy protection includes all the retirement accounts: traditional IRAs, Roth IRAs, SEP IRAs, SIMPLE IRAs and rollover IRAs. Protection is limited by the amount, which increases on a regular basis.

Here’s a look at the IRA bankruptcy protection from BAPCA:

Traditional IRAs and Roth IRAs: The most recent adjustment was in 2016, when the protection limit was increased to $1,283,025.

SEP IRAs and SIMPLE IRAs: These IRAs receive the same protection limits as traditional and Roth IRAs. They are used by self-employed people and small businesses.

Rollover IRAs: These are traditional and Roth IRAs that were funded by rollover transfers from an employer-sponsored retirement plan, like a traditional 401(k) or a Roth 401(k).

These protections are considered to be high enough to cover most American’s IRA accounts. There are some assets that are not protected. Some examples include general creditors, IRS levies and divorce.

General Creditors : There’s no federal protection for IRA owners, and the protection from general creditors varies by state law.

IRA Assets and IRS Levy: If you owe past taxes to the IRS, they can levy your pay and your IRA. They’ll generally go after other assets first, but if necessary, your IRA is fair game.

IRA Assets and Divorce: What happens to your IRA in a divorce, depends upon a court order and other assets that are held. If IRA assets are divided, taxes can be avoided. According to the “incident to divorce” rules in the tax code, IRA assets can be transferred and split between spouses without taxation within one year of the formal divorce date. This is one where you want a skilled CPA and matrimonial attorney on your side, so the tax liability is minimized.

Every situation is different, so speak with your estate planning attorney to make sure that your IRA assets are protected.

Reference: The Balance (Dec. 12, 2018) “What is IRA Bankruptcy Protection?”

Redefining Yourself When Your Role as Caregiver Ends

Sat, 19 Jan 2019 13:53:00 GMT

“When looking after a loved one becomes your life, what is your life when that person’s gone?”

A 65-year old woman devoted two years of full-time caretaking for her mother. When her mother died, she was left with the process of grieving and a big void in her life that led her to ask, “Now what?” Caring for another adult, as explained in the article “What Happens When Caregiving Ends” from AARP Bulletin, can be so consuming that caregivers put their own lives on hold.

When their duties as caregivers end, it takes a while to adjust. Some say it takes from six months to a year to start feeling like themselves again. Here are some lessons learned from caregivers:

Expect unexpected emotions. Caregiving is an emotional process as well as a mental and physical one. A range of emotions, from sadness and grief to anger and frustration, often emerge when your daily existence includes free time. There’s also a lot of guilt, which is very normal. Years, months or weeks of not sleeping, giving up your own interests and enjoyment in life, can lead to frustration. Then, when the person dies, you feel terribly guilty about the relief you may feel.

Don’t expect the strong and often conflicting feelings to go away overnight. It often takes years for people to work through all the emotions surrounding the loss of a loved one. That is especially true if they were the primary caregiver. We tend to think in terms of one-year anniversaries, but for many people the first year is wrapped up on settling estates, distributing possessions and dealing with the business end of someone’s life. In the second year, when those tasks are done, or less time-consuming, the emotions can start flooding in. You might expect yourself to be “over it,” but you can’t force yourself to recover. It takes a very long time.

Delay any big decisions. If you’ve been putting off big decisions until after caregiving ends, give yourself permission to continue to delay them. You’re still in a fragile state and need to move slowly. Selling a house, getting a divorce or remarrying is best done when you are healed. Patience is not easy, especially when you want to make a fresh start, or move away from a home with painful memories. However, going slowly will provide you with time to heal, and to gain perspective that will allow for better decisions.

Give yourself permission to move on. When the time is right, you’ll be ready to move on. If you devoted years to taking care of your spouse and grieving when he or she died, at some point you may be ready to enter another relationship. Many people are surprised when this happens, and realize that you can love someone else, or even simply enjoy their company, after a loved one has passed.

How To Keep Your Financial Resolutions in 2019

Wed, 16 Jan 2019 13:54:00 GMT

“For the 10th consecutive year, the three most popular financial resolutions for 2019 are saving more, followed by paying down debt and spending less, according to a new report by Fidelity.”

New Year’s Resolutions: we all make them but keeping them is another story. About 30% of all Americans plan on making financial resolutions for the year ahead, reports CNBC in the article “The secret to keeping next year’s financial resolutions.”

Getting more specific, most of the 2,000 people surveyed by Fidelity said they were going to save an extra $200 a month for their long-term 2019 goals, like retirement, college costs and health care. Half said they were going to boost contributions to their retirement savings plans, usually a 401(k) or their IRA. Higher limits for contributions to both are expected to increase the savings rate.

Like most of us, the people surveyed also admitted to making some spending mistakes they know made their savings less than they wanted. Chief among them: eating out too often and splurging on things that are way out of their budget.

How can you be sure to make and keep your financial New Year’s resolutions in 2019?

Try a budgeting app . There are several well-known, tried and tested budgeting apps that make keeping an eye on your spending and finding costs to cut easier. Once you’ve identified places you can cut spending and created a surplus, put that money into your savings account. Or, increase your retirement plan contribution. Even a little bit, can make a big difference over time.

Can you do better with your savings interest rate? Rising interest rates may make it possible to get a better return in 2019. As the Fed has raised its benchmark rate, yields on savings accounts are on the rise. While many savings accounts are only averaging 0.2%, some high-yield accounts are at 2.25%. Consider switching to a bank that offers at least a 2% return.

Note that the opposite goes for your credit cards: rising interest rates mean you’ll want to pay those off as soon as you can. Today’s average credit card interest rate is more than 17%. Try to pay the balance in full every month to avoid paying any more in fees than necessary.

Take control of your health care costs. If your Health Savings Account permits, increase the amount of money you contribute to your plan. If you didn’t use up all your funds in 2018, make an appointment for mid-year 2019 to schedule appointments or procedures you know you’ll need before the year is out. Make a resolution not to throw away health care dollars in 2019, especially if you have a “use-it-or-lose-it” flexible spending account.

Reference: CNBC (Dec. 15, 2018) “The secret to keeping next year’s financial resolutions”

Financial Institutions are Cognizant of Senior’s Diminishing Capacity

Wed, 09 Jan 2019 13:56:00 GMT

“Financial institutions are watching older customers for any early signs that cognitive impairment could put them at risk of financial exploitation.”

Financial elder abuse is on the rise. The Securities and Exchange Commission released a report this spring that says as many as 6.6% of elderly Americans had undergone financial exploitation in the last year.

Banking personnel see some of the early signs of cognitive decline, such as when a customer begins missing payments, sending duplicate checks, bouncing checks because of confusion over balances, or sending money to unrelated people. Does the bank have a legal, ethical and/or moral obligation to alert family members?

Until recently, financial institutions operated on the assumption that there were privacy issues that precluded them from informing anyone about these kinds of suspicions. The only questionable transactions that were reported, concerned possible illegal activities. Should they contact the local Adult Protective Services agency, or another social service agency?

A new federal regulation was signed into law this past spring that protects financial institutions from litigation, if they report concerns about elder financial abuse to government agencies, although there is no requirement that such reporting take place.

Some experts would like to see financial institutions go further and share their concerns with each other. This is commonly done when commercial fraud is suspected, through a department of the U.S. Treasury.

Reporting on a client’s behavior is a grey area, but some companies are enhancing their ability to identify problems. The use of Artificial Intelligence (AI) allows banks to monitor and analyze massive amounts of data that may reveal cognitive declines. In addition to relying on AI, institutions are training staff members to watch for behavior markers that may indicate decline or fraud. It helps if the banks have contact information for other family members, which can happen if the customers will permit family members to access their accounts.

One persistent problem: often the family members are the ones who are committing financial elder abuse. Another is that seniors are embarrassed about a non-family member revealing their declining capacity and often deny that anything is wrong.

Reference: The Wall Street Journal (Nov. 20, 2018) “Banks Monitor Older Customers for Cognitive Decline”

When Your Estate Plan Needs Teeth, You Want a Lawyer to Create It.

Sun, 06 Jan 2019 13:57:00 GMT

“If your relationship with a close family member has fractured, you may want to disinherit that person or put real teeth in your estate plan, as distasteful as it may be.”

The first step is to work with an experienced estate planning attorney, who practices in your state. This is a complicated process, and if you don’t do it right, it’s entirely possible the person you want to disinherit can appeal your action in court after you’ve died—and win.

A living trust may work better than passing all your assets through a will, when you want to disinherit someone. A will is easier to challenge. He or she may say you were being influenced by someone else when you had your will written, and, therefore, the disinheritance does not reflect your real wishes. They could also claim that you signed the will without understanding what you were signing, and that you were not mentally competent and could not make legal decisions at that time. This is a charge of fraud.

After you die, your will becomes a public document, and anyone can find out who you decided to disinherit. They may be angry or embarrassed and feel the need to set the record straight, challenging your will to prove their worth.

A living trust, when prepared correctly, remains a totally private document. In some states—check with your estate planning attorney—it can only be challenged by the beneficiaries of the trust.

There can always be charges of fraud, as a result of your being mentally incompetent to sign the trust. However, most people who create living trusts do so several years before their death. Wills are often written or revised shortly before death. Therefore, the person who created the trust has likely opened accounts in the name of the trust, used the accounts, paid bills, etc. That activity makes it hard to prove incompetence.

What if you want to leave someone only a partial inheritance? Your best bet is to ensure that your estate includes a strong “No Contest” provision, technically termed “ In Terrorem .” It’s a little harsh, but the general idea is that whoever challenges the will, gets nothing. Courts don’t always like it, but heirs may think twice about challenging your will.

Remember that many of your assets are in accounts with beneficiary designations: IRAs, SEPs, investment accounts, life insurance policies, etc. Review the names on your accounts to make sure the person you want to disinherit does not appear on those accounts. You can also use Payable on Death (POD) or Transfer on Death (TOD) on accounts to keep that “disinherited” person from knowing about assets moved to other heirs outside of your will.

Blended families face unique challenges. Friction between stepparents and stepchildren can explode, when one parent dies and the second spouse is left without the other parent as a buffer. Tensions that were kept under the surface, may bubble up quickly. Make sure that all the children know what your plans are for your estate, to avoid breaking up the blended family.

Disinheriting someone, for whatever reason, can create hard feelings that remain for generations. If you feel you have no choice, speak with your estate planning attorney to be sure it’s done correctly and lessen the chances of any challenges.

Reference: Next Avenue (Dec. 11, 2018) “How to Disinherit a Family Member”

New Year’s Resolutions Can Still Include Your Estate Plan

Wed, 02 Jan 2019 14:08:00 GMT

“We often think of exercising more, eating healthier or getting better sleep, but what about a resolution that continues in the spirit of giving? A resolution that ensures your wealth administration and estate planning are properly structured will greatly benefit you and your family.”

Joining group yoga at your favorite park is fantastic. Resolving to address your estate plan and wealth administration in the coming year is just as fantastic, and will be a big help to you and your family. It’s easy to become overwhelmed—how many accounts do I have? Who is the named beneficiary? Who will administer my estate? To make it easier, use this checklist:

Revisit your estate plan. Have you looked at your estate plan in light of the 2018 tax law changes? Have you updated your beneficiary names on any accounts? Do you have contingent beneficiaries named?

Develop or update your will and don’t forget to sign it. If you pass without a will, the laws of your state will determine how your property is distributed, and the court will assign a guardian to your minor children. Better—have your will created or update it. Not having a will may increase your family’s tax liabilities, not to mention the legal disputes or challenges that result when there is no will. Don’t forget to finalize the document with your signature. Yes, that really does happen, and it leads to unnecessary problems.

Revise your charitable giving. Instead of annual charitable giving that may no longer be deductible under the new tax laws, consider donating a larger sum to a donor-advised fund. This lets you receive an immediate charitable deduction and distribute funds to carefully vetted charities over time. This also lets your money grow tax-free before it is donated.

Check on your insurance coverage: Just as your life changes and your estate plan changes, your insurance needs change also. Make sure there are no gaps in your coverage and that there’s enough liquidity to pay estate taxes, satisfy any buy/sell agreements and provide enough money to support any survivors. If you have young children, have you included their college educations in your insurance portfolio?

Business succession plan review. Business owners who pour their heart and soul into their businesses hate to think about succession planning, and as a result many do nothing, leaving partners, family members, and clients in a bad position. What would happen to the business, if something unexpected occurred to you? Does your retirement plan center on the sale of your business? It usually takes a long time to create a business plan, and then it needs to be reviewed on a regular basis to ensure that it still works for all involved.

Make an appointment with your estate planning attorney. Make an appointment now, and you’ll be sure to go over these steps before too much of the new year passes by.

Reference : Grand Rapids Business Journal (Dec. 7, 2018) “Incorporate estate planning into New Year’s resolutions”