Building Legacies that Last Estate Planning and Elder Law

Does Your Estate Plan Have All the Right Stuff?

Man holding glasses sitting at computer

“Many people think estate planning means deciding what happens to your things when you die. For that reason, many young families do not consider estate planning to be a priority. However, it may be one of the most important things young parents can do!”

A last will and testament is the document which parents need, to legally nominate guardians to rear their children if orphaned. It clearly delineates who should take care of the children and who should manage the money available to care for the children, as noted in The Daily Sentinel’s article titled “What is missing from your estate plan?”

While some people name one person to rear the children and handle the money, it’s a good idea to separate the two roles.

Without these instructions in a will, those left behind can have very different ideas about where the children should live and who should care for them. If the two parent’s families have very strong opinions, suddenly both families have hard choices to make about what will happen to the children.

No parent wants to leave a legacy of court battles and family division.  However, that’s what is likely to happen without a will.

There are other issues that estate plans address while you are alive.  It is also necessary to plan for incapacity. A living will, also known as an “advance directive,” is important because it helps pre-answer questions, regarding what treatment and care you would want if unable to speak for yourself. Do you want to be kept alive by artificial means? You do not want your loved ones making this decision during a time of great emotional stress, so this is an important document to have in your estate plan.

Finally, your estate plan should include a medical durable power of attorney to deal with all other medical decisions other than end of life. Without it, if you are not near death but not able to share your opinions about your care, your family and your medical providers are placed in a difficult position. In contrast, those who care enough about their family designate an agent and ensure that their wishes are made legally binding.

The big question everyone must face is “When should I start working on my estate plan?” If the answer is “Later,” then the real answer is “No time soon.” For young parents, that puts your minor children in a bad position, where a court may make the decision about who will rear them and how their lives will go on after you are gone.

Don’t make your family have to go through more than they would have to anyway. Speak with an estate planning attorney to create your estate plan, including these very important documents.

Resource: The Daily Sentinel (Aug. 12, 2018) “What is missing from your estate plan?”


Estate Planning Fundamentals You Need to Know

Fortune cookie broken open

“It’s easy to put off because it can be morbid and often doesn’t kick in until late in our lives, but it’s an important piece to be thinking about for those of us who want to make sure our families are provided for.”

A well-prepared estate plan can help you and your family reach many different goals. You may know that your estate plan provides for your spouse and children, including what should happen to them, if they are minors and need someone other than you and your spouse to rear them. In addition, says the Brainerd Dispatch in its article “Wealth Column: Estate Planning Basics,” an estate plan can also be used to dispose of the family business, minimize tax liability and empower an executor and trustees to act on your behalf.

First, you’ll need a will, which is the basic tool for estate planning. It prevents two very expensive and stressful issues: managing your wishes for your estate and possibly losing hefty sums through unnecessary taxes. However, that’s just the start.

You may also need trusts, depending on your family’s situation. You’ll want to have life insurance policies with beneficiaries. Life insurance proceeds are not governed by the will, so your heirs will receive any funds directly. Benefits from retirement funds fall into this same category. That’s why making sure that your beneficiary designations are up-to-date, is so important.

Working with a team of trusted advisors, is productive for most people. Remember that your estate plan touches on taxes and investments as well as your will, power of attorney and medical directive. Consider these steps to get your entire estate plan in order:

  • Gather personal data about yourself and your family,
  • Create a balance sheet of your assets and liabilities,
  • Review your will and any existing trusts,
  • Evaluate all estate tax options, such as the best method of disposing of your share of community property—considering the unlimited marital deduction and the use of tax-sheltered trusts,
  • Consider the optimal way to distribute your retirement plan benefits,
  • Calculate potential estate, gift and income tax liabilities,
  • Determine the availability of liquid assets to meet potential estate expenses and taxes.

Once you have all this information together, you and your estate planning attorney can begin to put together a plan that will serve you and your family. Remember that an estate plan is not a one-and-done document. Over time, as your life and tax laws change, you’ll need to review the estate plan,  which includes beneficiary designations.

Resource: Brainerd Dispatch (Aug. 3, 2018) “Wealth Column: Estate Planning Basics”

Will SAFE Act Really Make Seniors Safe?

Elderly woman looking serious

“In an attempt to take a step toward countering some of the negative impact of elder financial abuse, the government recently passed the Senior Safe Act in May 2018, as part of a bipartisan banking reform set of laws. “

Elder abuse costs millions of Americans an estimated $2.9 billion annually. The expectation is that these numbers are only going to increase, as the scams targeting the elderly become more and more sophisticated. This is according to Forbes in ““After SAFE Act Passage, The Battle Against Elder Financial Abuse Remains Far From Over.”

The aim of the Senior Safe Act is to encourage financial institutions of all kinds to play a larger role in fighting against elder financial abuse. The law, which was modeled after the Senior$afe program created in Maine, requires financial institutions to train employees on detecting activities that may indicate elder abuse is occurring. If the employees are trained, the Senior Safe Act also provides a reporting process and liability protection for those who report the possible abuse.  It is thought that the liability protection would make those individuals reporting the possible abuse more proactive.  However, there are still some problems with this.

Some advisors report being reluctant to report any client who seems to be suffering from mental deficiencies or elder abuse. The problem, advisors say, is that they are not trained and won’t feel confident in making a judgement about competency. Some court cases have put the onus on the advisor, when selling certain products or strategies but advisors lack both the training and the ability to make a medical diagnosis of senior clients. Without the ability to identify competency, it is very likely that any reporting will only take place well after the elder financial abuse has taken place.

Another issue is that family members or friends are typically the ones who commit elder financial abuse. The victim usually does not want to press charges, fearing that the person will become angry with them and withdraw their emotional support. Being dependent upon the same person who may have perpetrated financial abuse, puts the elderly person in a no-win situation.

Elder abuse prevention, financial and otherwise, should start years in advance, at the first signs of declining physical and mental health. It should begin with a plan for managing financial assets and having the proper legal documents in place, including a will, power of attorney, general durable power of attorney, healthcare directive and other estate planning documents.

By being proactive while the individual is still relatively well and healthy, it may be possible to create protections that will be crucial later in life. Speak with your estate planning attorney now, to make sure that your estate plan is in place, so you and your family are protected.

Reference: Forbes (July 23, 2018) “After SAFE Act Passage, The Battle Against Elder Financial Abuse Remains Far From Over”


Cohousing May Be the Answer for Many “Golden Girls” and Guys

Generational Family smiling

“Here’s one answer to the “Where to go next?” question being asked by those inching toward retirement, or those looking to escape the increasing cost of Seattle living and combine resources with a like-minded community.”

For those living in high-cost areas, like Seattle, San Francisco, New York, Los Angeles and other places where the cost of housing is astronomical, the idea of purchasing land and building tiny houses next to each other seems like something out of a movie. But according to an article in Seattle Times titled “Battling rising cost of living? Seeking a community? A look at the cohousing lifestyle,” this could be a very real and enjoyable solution for many retirees.

This past June, Charles Durrett, an architect who has been advocating for the cohousing lifestyle for years, presented a workshop for people who want to establish these types of communities. The idea is that everyone gets their own private home and living quarters, while sharing kitchens and other shared rooms. Neighbors share house items, meals, coordinate activities and make group decisions about how to manage their shared lives.

While he introduced the concept and phrase “cohousing” thirty years ago, he says that he’s now busier than ever before. The workshop was sold out.

The concept could be an ideal solution for seniors who don’t want to give up their privacy but would like to be part of a smaller community. Durrett recommends that each community have a caretaker unit, so someone who is able to take care of the residents, can live as part of the group.

The success of a cohousing community is not in the size or design of the house.  It is due to the enthusiasm of the people coming together, who believe their lives will be better, if they are living as part of a community. That’s the common denominator. The architect has lived in a cohousing community for 12 years with 30 adults—20 of them seniors—and 20 children.

Research has shown that people live longer, when they are socially engaged.  However, social can also turn to drama, especially in small groups. Therefore, people must learn how to get along and cooperate.

Is cohousing for you? You should do your homework before making a big decision about selling your home to live in a shared community. Your estate plan should also reflect your new position and be aligned with your new ownership. An estate planning attorney will be able to help you achieve that goal, while protecting your assets for your heirs.

Reference: Seattle Times (June 1, 2018) “Battling rising cost of living? Seeking a community? A look at the cohousing lifestyle”


Think 61 is Your Golden Retirement Number? Think Again

Elderly couple enjoying retirement

“There's nothing wrong with looking forward to retirement and even planning an early exit from the workforce.  However, Americans may be a bit misguided, when it comes to this particular milestone.”

If you work for a living, chances are good you like to daydream about what your life will be like during retirement. We all do it and so do younger workers who have yet to pay their dues.  However, according to a survey from Bankrate, as reported in The Motley Fool’s article titled “Americans’ Ideal Retirement Age–and Why It’s Not Realistic,” adults across the board think that 61 is the ideal age to retire.  Is that realistic?

Unless you can live without Social Security during retirement, 61 is not your magic number. Most American retirees can’t live on Social Security alone and those benefits have a major impact on the ability of most retirees to keep up with their bills.  However, eligibility doesn’t start until age 62. The people in the survey either didn’t know they can’t collect Social Security until they turn 62 or they are assuming they can get by without it.

The average Social Security benefit check is just more than $1,400, which adds up to about $17,000 a year. If you are among those who have little or no money set aside for retirement, that’s a lifeline.

A large number of working Americans are way behind in their retirement savings. It’s estimated that around 42% have fewer than $10,000 set aside for the future. How will they retire at all, much less retire at age 61?

Even if you can manage to keep working until age 62, filing at that age has its own issues. Today’s workers need to wait until their Full Retirement Age, or FRA, in Social Security’s terms, to receive their full monthly benefit. The difference is large enough to make it worth the wait.

Assume that your full retirement age is 67, but you retire at age 62. Instead of $1,400, your monthly benefit would be $980.

However, what if you are among those who really want to retire at 61? You’ll need to have started with saving and investing for retirement at a relatively young age and have been willing to take a very aggressive position in your investments. If you started at age 26, with a goal of retiring at age 61, and you are employed by a company with an employee sponsored 401(k), you’d have had to contribute $1,500 a month for thirty-five years to amass enough money—if your investments were earning a steady 7%.

If retirement is around the corner, one thing you can do is make sure your estate plan is in place. Therefore, whatever assets you have, will be distributed according to your wishes. Make sure you have also taken care of having a power of attorney and healthcare directive in place. Speak with an estate planning attorney to make sure these documents are prepared correctly.

Reference: The Motley Fool (July 18, 2018) Americans’ Ideal Retirement Age–and Why It’s Not Realistic”


Help with Healthcare Costs in Retirement

“A financial planner’s client was traumatized in the dentist’s chair, but it was not the drill that scared her. It was the dentist’s bad news.” MP900182808

The frightening news was that she needed thousands of dollars of dental work, a cost she had not anticipated when she retired a few months before the appointment. What if this happens again, she thought. Am I going to run out of money? She was in good shape, her financial planner assured her. But not everyone is as fortunate, as reported by Reuters in an article titled “How to shockproof your retirement healthcare costs.”

Almost all retirees fear that a medical expense shock will decimate their savings. In a national survey by Brightwork Partners, as many as four out of five boomers agreed that they are worried about this.  However, they are too confused by all of the details, to actively plan for medical costs during retirement.

Help is on the way from national retirement researchers and investment companies. While most retirement healthcare research focuses on the big picture, like Fidelity’s recent estimate that a couple is likely to spend $280,000 on healthcare costs in retirement, a new study from Mercer Health and Benefits and Vanguard Research got a lot more granular.

The goal of the study is to develop a model that can be used by people before they retire, so they can create a budget that includes this admittedly staggering number. This model will be able to help set necessary saving goals and plan on how to achieve the goal.

An average 65-year-old woman retiring and using Medicare in 2018 will need $5,200 to pay for medical expenses. That’s including Medicare, additional health insurance and out-of-pocket costs. By 85, the cost jumps to $10,100 annually, or, for a less healthy person, $14,000. As they age, people need more health care and researchers say we should consider “healthcare inflation” as starting at 6.6% annually, with a rate of 4.5% over time.

Before retiring, experts say people need to be honest with themselves about their health and the costs that will ensue. If they have chronic illnesses like diabetes, cancer, heart disease or arthritis, they need to expect to spend more than the average amount.

The biggest medical care shock to retirement savings is long-term nursing home care.  However, these researchers found that only one in seven will face those costs for two years or more.

Rather than panicking, think about these issues in advance and prepare for the costs. You should also consider what you can do to address expenses. One option is to move closer to family members, who might be able to help with care at home.

Reference: Reuters (July 11, 2018) “How to shockproof your retirement healthcare costs”


Now Is a Good Time to Revisit Your Estate Plan

Bigstock-Vintage-brass-telescope-on-ant-44347372“There still are many sound nontax reasons to revisit estate planning and possibly update your prior documents.”

Even with the doubling of the individual estate gift and GST tax exemptions to about $11.2 million per person (and double the amount for married couples), you still need a will, says Forbes in a useful article titled “7 Reasons to Revisit Your Estate Plan, Trump Tax Law Aside.”

A will serves as the primary vehicle to convey your intentions for your assets and explain your legacy. The provisions of the will can be used to designate how assets will be transferred, whether outright to beneficiaries, to existing trusts or into a new trust that is created under the provisions of the will. If you use the will to create a testamentary trust, the will is where you specify the age for distributions to the beneficiaries and other important details. The will is also how you convey your wishes to make a gift to specific institutions and who should receive family heirlooms.

The executor or personal representative of the estate is the person or institution in charge of managing your affairs, after you have passed. The executor gathers all the information about your estate, including assets and debts, filing taxes and administrative tasks. That person is named in the will.

If you have minor children, or a child with a disability, you want to choose a guardian and a successor guardian. If you do not, the court will appoint someone to rear your child(ren), and that may not be the person you would have wanted. Your spouse is always the obvious choice, but there are instances where both parents die unexpectedly, with no plans in place for their children.

There are many different types of trusts used to accomplish different things. They can be used to control assets and their distribution, which is particularly important when minor children are in the family. Trusts should be used when there is an individual in the family with a disability, an addiction or other issues who cannot manage their finances on their own.

Tax planning is a major part of any will. For a long time, estate planning attorneys focused on how assets were titled, so that the first of a married couple to pass would be able to fully use their estate tax credit.  However, the relatively new concept of “portability,” which allows any unused credit from the first spouse to pass to be used for the benefit of the second spouse, eliminates the need for any unused estate tax credit to go into a bypass trust.

Not only do you need a will, but this year you should consider reviewing your will, if you have not done so. The new tax law may have eliminated or reduced some estate tax liability, but it has not eliminated the need for mindful and proactive estate planning.

Reference: Forbes (March 15, 2018) “7 Reasons to Revisit Your Estate Plan, Trump Tax Law Aside”


Dodging an Unpopular Tax Provision

MP900442233The recently passed federal tax overhaul limits deductions for state and local taxes to $10,000.  It has not been popular with those affected. Estate planning attorneys might have found a way around it.

The new tax laws that were passed in December of 2017 have been controversial. Some people are very happy with the changes.  However, most people have found something they do not like about them. One of the more controversial changes was that the itemized deduction for state and local taxes was limited to $10,000.

People who own expensive property in high tax states are not happy that as it will increase their taxes, in many cases. Initially, some state governments tried to figure out a way around the limit for their citizens, but the IRS shot most of those down. Some estate planning attorneys might have found a solution though, as Bloomberg reports in "How the Rich Can Dodge Trump's Property Tax Hike."

The idea is to first create an LLC in a non-tax state such as Delaware or Alaska. Real estate ownership is then transferred to the LLC. After that, several non-grantor trusts are created. Ownership of the LLC is then divided up and transferred to the new trusts. When tax time comes around, each non-grantor trust can take a $10,000 deduction for any property taxes that were paid by the LLC. Effectively, the new deduction limit can be rendered moot.  Ask your local estate planning attorney about this practice.

The IRS could issue a new regulation against this practice.  However, estate planners think it will work.

Reference: Bloomberg (June 15, 2018) "How the Rich Can Dodge Trump's Property Tax Hike."


Why You Need an Estate Planning Attorney

Why You Need an Estate Planning Attorney

MP900400337You might think that you do not need professional assistance for your estate plan because you know who you want to get what. There is more to estate planning than that.

It is actually easy to create an estate plan for yourself. You can simply write your own will, directing who should get what pieces of property.  If you execute that will properly with witnesses and signatures, your will can be probated.

If you are not certain that is the best idea and would like a little bit more help, download some prepared forms to fill out from an online service at a low cost. The ease of doing that might make you think that an estate planning attorney is not necessary.  However, there are other reasons to see an attorney, as the Huntsville Item points out in "Do you really need an estate planning attorney?"

Those other reasons include:

  • The estate planning attorney knows about property law and how different types of property are handled differently by courts. If you do not get this correct in your will, your estate can face difficulties.
  • There are different types of estate planning documents that do different things. Estate planning attorneys can help you pick the right ones for your unique circumstances.
  • Estate taxes are still a concern at the federal level for many people and in several states. A professional is needed to properly plan around them.
  • The attorney can also help craft your estate plan in a way that compliments your other financial goals, often including paying less in taxes.

Reference: The Huntsville Item (May 21, 2018) "Do you really need an estate planning attorney?"


Why You Need an Estate Plan

If you think that you do not need an estate plan because you do not have very many assets, then you do not understand that estate planning is not just about your property. Mac-glasses

There are millions of Americans who do not have very many assets that need to be distributed after they pass away. It is not the case that they are all poor. Many of them are just younger people who have not yet lived long enough to accumulate assets.

People often think they do not really need estate plans, if they are young and with limited assets. In some sense they are correct.  If people do not own any real estate and do not have any other valuable property, it will not be too difficult for their families to handle their estates. However, estate planning is about more than that, as the Times Herald-Record discusses in “Everyone can benefit from an estate plan.”

Almost all estate plans today also include some legal documents that are traditionally considered elder law documents. Despite the term “elder law”, even young people need these documents because they are really about planning for disability.

That is planning for the possibility that you could have an accident or illness that does not kill you.  However, it can leave you legally incapacitated, even if it is only on a temporary basis. These documents include a health care power of attorney, so someone else has the authority to make health care decisions on your behalf.  It also includes a general durable power of attorney, so someone else can handle your finances, if you are unable to do so.

Reference: Times Herald-Record (May 17, 2018) “Everyone can benefit from an estate plan.”