What measures would you like carried out, if health issues arise and you can’t speak for yourself?
A very important conversation to have with your loved ones is what you would like for care should a health crisis arise. While it most likely will not be your favorite conversation, it is important that you don’t put the conversation off until the need for it is created by an immediate situation, according to the Cleveland Clinic in “How to Get Your Living Will and Healthcare Power of Attorney in Order,”
Three tasks you need to tackle:
Have your estate planning attorney help you complete advance directives. Remember that each state has its own laws, so work with a local attorney who can create the correct documents. You’ll want a Health Care Power of Attorney to name an agent, who will make medical decisions when you can’t speak for yourself. If you recover enough to able to become competent, then their responsibility is completed. Without a Health Care Power of Attorney, the state’s laws will determine who makes your medical decisions.
You also need to have a living will. This will spell out the kind of care you want, if you are terminally ill or permanently unconscious. The focus of this document is keeping you comfortable, versus using artificial means to keep you alive. This is also the document to use to express your wishes regarding organ donation.
Talk with your family and loved ones. Critical care doctors often report that when they ask patient’s family members what the patient’s wishes are, few families know. What if you woke up from a car accident, and discovered that you were breathing through a ventilator and could neither speak or move? These are uncomfortable conversations, but in their absence, patients and families are left in worse situations.
You should also talk with your doctors and healthcare providers about your wishes. It is important for them to have a copy of your advance directives to keep in your medical records. They’ll be scanned and placed in your file. Let them know about your wishes your values and about end-of-life care. Your goals may change, so you may need to have more than one conversation. You may want to speak with your family members first, then document your wishes with your estate planning attorney.
If you are thinking of upscale retirement, it might be best to check in early and enjoy the lifestyle.
Boomers have had a way of being out front, when it comes to making changes in society and it isn’t any different when it comes to retirement, as they eye the expansion of five-star luxury retirement communities, according to The New York Times in “Boomers Create a Surge in Luxury Care Communities.”’
Industry estimates say about 15 million people have saved enough to afford private continuing care, and these people expect a high level of service and surroundings.
There are now nearly 2,000 Continuing Care Retirement communities, or C.C.R.C.s, with about 700,000 residents. Many require entrance fees and monthly charges that cover services, food, and care. The average age of people entering these communities are in their early 80s, and they tend to stay for seven to 10 years.
The upscale segment of C.C.R.C.s are not for the budget conscious, with entrance fees for one community starting at $1 million for a two-bedroom bungalow, and monthly charges of more than $6,000. Demand is high at this community, where the occupancy rate is 100% and there’s a waiting list.
Construction of new luxury communities is underway in Dallas, Southern California, Arizona, New York, San Francisco, Boston, Los Angeles, Miami and Washington, D.C.
What is the challenge, when money is not an issue? The contracts. The contracts can be complicated, there is no federal regulation or oversight and only 38 states have regulations, which vary from state to state.
In some communities, portions of the entrance fees are returned to the resident’s estate upon death or are refunded, when people leave. However, some of those fees are not returned, until the units are sold. There has also been litigation over refund policies. In New Jersey, state law now requires operators to issue refunds in the order that units are vacated, and not when they are sold.
Given the complex nature of the contracts, the size of the purchase and the varied laws, it is recommended that potential occupants work with an elder care attorney to review any contract.
C.C.R.C.s have existed for decades, first as faith-based organizations created them to house and support widows. Over time, they have evolved into communities for people who have a vision for how they want to live in retirement.
The luxury sector of C.C.R.C.s was smaller in the past, but experts say that as demanding customers—baby boomers—age, they will drive the market.
Spouses can leave their assets separately and have their own revocable trust. When the first spouse dies, a trust can be established so the surviving spouse has income and even principal. The surviving spouse should not be the only trustee, which would avoid the situation described.
Consider giving children a bequest after the first death. That way, if the surviving spouse needs to use all the funds, at least the biological children will receive something.
Make a joint trust irrevocable upon the first spouse’s death. If spouses sign a joint trust, then draft the trust, so that it becomes irrevocable on the first death.
Give thought to having separate bank and/or investment accounts and name children as beneficiaries, if you want them to inherit your assets. If assets are owned separately, there is a better chance of avoiding a lopsided inheritance or some children being disinherited.
Talk about your funeral plans. Do you want to be buried with your deceased first husband? Where do you want to be buried? Do you want the kids to decide? Avoid a lot of heartbreak by discussing this, as difficult as it may be.
Name a spouse and children as co-attorneys. If everyone works well and plays together, this could give everyone a voice in important decisions. You want to strengthen a family, not fracture it.
Communicate, often. This is not a one-time conversation and should not be swept under the rug.
Check beneficiary designations. These are the forgotten distant cousins of estate planning. People create accounts, name beneficiaries and then often forget about them.
Blended families are always a work in progress and the better you can plan ahead for the death of one of the spouses, the more likely the family will remain a cohesive unit after one parent dies.
An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances and may include a blended family.
The decision to disinherit someone isn’t made lightly and needs careful consideration.
Sometimes as the difficulties of life wind through families, it is decided it would be best to disinherit a family member. It can be done. However, it needs careful legal consideration, according to Next Avenue in “How to Disinherit a Family Member.”
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.
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. It does make people think twice.
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).
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.
An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances.
The article details the story of an 80-year-old man who retired from a mid-sized company with a “guaranteed pension.” The pension may have been guaranteed, but what was not guaranteed was the amount of his monthly payments. They were cut, several times.
He and his wife were receiving about a third of what they had counted on receiving, which created a financial hardship they never anticipated. They did what they could with their budget, but had to tap their savings, which were nearly gone.
Friends suggested a reverse mortgage, but they were reluctant to do so. Their home was the only asset, and they didn’t want to find themselves with nothing.
The man wished he had gotten a part-time job after retirement. They could have lived frugally on this income and let his pension continue to grow. They were considering, even at this late stage in their lives, getting part-time work just to give themselves a few hundred dollars a month, in addition to their Social Security income.
He also wished he had never trusted his pension “guarantee.” He wished that he had multiple income buckets for retirement. A pension and Social Security are two buckets, but a third and a fourth would have given them more income, which as it turned out, they desperately needed.
Finally, he said that he wished he and his wife had devoted more time to planning for their retirement years to last far longer than they had anticipated. They are both likely to live into their 90s, or even to 100. They had no idea they would need income for a three- or four-decade retirement.
There are no guarantees in retirement planning but having multiple sources of income makes it far more likely that your retirement income will be enough to live on, and hopefully enough to enjoy the things you want to do during retirement.
Social Security is not a guarantee, although it has been dependable in the past. It is possible that this government agency will face challenges in the future. Fewer and fewer workers have pensions of any kind. Instead, we rely upon our 401(k) and IRAs to keep growing. A plunging stock market could take a bite out of those funds. Personal savings that grow over time and home ownership are worthwhile goals, but real estate prices do fluctuate.
An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances.
What is the number one concern about retirement? Running out of cash is the answer. However, there are steps that can be taken to reduce the chances, according to the AARP Bulletin’s article “4 Steps to Make Your Money Last a Lifetime.”
Some guidelines to follow that can be helpful:
What’s Your Magic Number? Knowing how much money you can afford to spend annually, is the first step. Once you know that information, you can start adjusting your expenses and making changes to fit. It’s tempting to work this problem out backwards, i.e., first estimate your expenses, then adjust your investment assumptions. However, that’s not always realistic. It often leads to overspending. Overspending in the early years of retirement dooms many people’s income in the last decades of their lives. Focus instead on the “real” money: your personal savings and investments, and your guaranteed income.
Your Guaranteed Income. Most people start with their Social Security benefits. These may be reduced in the future, but that future may not arrive for a long time. Therefore, let’s consider them to be a solid number. If you are among the lucky ones, you may have a pension from work. If you own an annuity, or rental property, what income do those assets generate?
Savings-Generated Income. This gets a little tricky, especially with a volatile stock market. How much income can you take from savings and investments, without depleting either too fast? Try this rule of thumb:
Add up the current value of spendable assets. That includes bank accounts, mutual funds, stocks, and bonds. Include retirement accounts, as well as non-retirement accounts.
Subtract from that number a cash cushion, which you should have to cover expenses.
Calculate 4% of that.
This is what financial planners say is the “safe” amount you can afford in the first year of retirement without risking running out of money. Then, take out the same dollar amount, plus an increase for inflation.
Total Your Income. Add that 4% to your other income sources: Social Security, pensions, etc. That’s your safe living expense money. Don’t forget to calculate your tax and health insurance payments.
Create a Realistic Budget. Divide that income by 12 to get your available monthly cash. You’re done. If that amount is not enough, then you may have to rethink additional sources of income, like part-time work, or retiring later than you had originally planned.
An estate planning attorney can advise you in creating an estate plan that fits your unique circumstances.
Where do you want your assets to go, when you think of your loved ones?
Estate planning can be a comfort to you but is also a gift of peace of mind to your family and may be a good way to begin the New Year, according to the Brainerd Dispatch in “Give the gift of estate planning to loved ones this holiday season.” The article describes how stress and guilt for the family can be alleviated, just by having a good estate plan in place.
Your estate plan will provide your family with clear directions on where you want your assets to go when you have passed, but that’s just for starters. They will be dealing with many moving parts when you pass: funeral arrangements, notifying family members and grief, which can be overwhelming.
If you don’t have a will or haven’t done any planning, the process for your family to gain access to your assets becomes extremely problematic. The process is called probate, and it can take months and cost a great deal to unlock real estate ownership, account information or other assets for your spouse, children and grandchildren.
There’s also no way to ensure that your assets will be distributed as you wanted, if you do not have a will or an estate plan. Let’s say you have a non-traditional family. You’ve lived with your partner for decades, even raised children together, but never married. Your partner and your children may find themselves completely without any voice in your estate, and no right to any assets. Without a will, the state’s laws will determine who receives your assets, and that may be a sibling or a parent, if still living.
Your estate plan becomes your legacy, and it’s not just for family members. If there are causes or organizations that have meaning for you, they can be included in your estate plan. Lifetime giving or giving “with warm hands” is rewarding, because you get to see the impact of your generosity. However, you can use an estate plan to make a gift to an organization, which serves a dual purpose. It decreases the value of your estate, and can lessen the tax burden of your estate, giving your family more money.
There are many ways to make planned giving part of your estate. Donor advised funds are increasingly popular, or you may want to use a charitable trust or fund a scholarship. Your estate planning attorney will be able to help you determine the best way to structure your giving.
An experienced estate planning attorney has worked with families of all different types and will have the knowledge and skills to help you create an estate plan that works best for your family. The attorney will also encourage you to talk with your family members to make sure they know that you have put a plan into place. You may wish to have a family meeting with your estate planning attorney, to ensure that everyone understands why you made the decisions you did and ensure that the family understands that your estate plan is a gift from the heart.
The estate plan is a major tool to protect your family.
Okay, you now have an estate plan. What’s the biggest mistake you can make? Not updating the plan as the years go by and life changes occur, according to the Times Herald in “Top six estate planning mistakes.” Another big mistake would be to not have an estate plan at all.
An estate plan allows you to stay in control of your assets while you are alive, provide for your loved ones and for yourself in the event you become mentally or physically incapacitated, and when you die, give what you have worked to achieve to those you wish. It costs far less to take care of all of this while you are alive. It’s a gift to those you love, who are spared a lot of stress and costs if it must be figured out after you have passed.
Once you have a plan in place, you have to keep it updated. An estate plan is like a car: it needs gas, oil changes and regular maintenance. If your family experiences significant changes, then your estate plan needs to be reviewed. If you change jobs, have a change in your financial status, or if you receive an inheritance, it’s time for a review. When there are changes to the law, regarding taxes or non-tax matters, you’ll want to make sure your plan still works.
The second biggest mistake we make is failing to plan for retirement. If you start thinking about retirement when it is five or 10 years away, you’re probably going to be working for a long time. When you are in your twenties, it is the ideal time to start saving for retirement. Most people don’t start thinking about retirement until their thirties, and many don’t plan at all.
There are many different “rules” for how to save for retirement and how to calculate how much income you’ll need to live during retirement. However, not all of them work for every situation. Advisors are now telling Americans they need to plan for livinguntil and past their ninetieth birthday. That means you could be living in retirement for four decades.
Mistake number three—failing to fund trusts. Trust funding is completely and correctly aligning your assets with your trust. If you don’t fund the trust, which means putting assets into the trust by retitling assets that include bank accounts, investment accounts, real estate, insurance policies and other assets, adding the trust as an additional insured to home and auto insurance policies and have every change verified, you have an incomplete estate plan. Your heirs will have to clean up the mess left behind.
Fourth, failing to communicate your estate plan to your executor, beneficiaries and heirs is a common and easily avoidable mistake. Talk with everyone who is a part of your estate plan and explain what their roles are. Speak with the person you have named as Power of Attorney and Healthcare Proxy on a regular basis. Make sure they continue to be willing and able to perform the tasks you need them to do on your behalf. Make sure they know where your documents are.
Fifth, don’t neglect to make arrangements for bills to be paid and financial matters to be handled when you are not able to do so. There are many studies which show that after age 60, our financial abilities decrease about 1% per year. Expect to need help at some point during your later years and put a plan in place to protect yourself and your spouse. If you are the main bill-payer, make sure your spouse can take care of everything as well as you, before any emergency strikes.
Finally, talk with your successors about what you would like to happen if and when you become mentally unable to make good decisions, including caregiving options. As we age, the likelihood of needing to be in a nursing home or other care facility increases. You can’t necessarily rely on your spouse living long enough to take care of you. Make sure that your financial power of attorney contains the appropriate gifting language, your assets are titled properly and your successor financial agents know about the plan you have created. If you don’t have a long-term care policy now, try to buy one. They are less expensive, than having to pay for care.
An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances.
In the article, the matriarch of a New England family decided to give up the tax benefits of 529 College Savings Accounts and go with a trust. However, the the best method depends on the family and the circumstances.
The reason the matriarch made the trust decision was to have more flexibility. The 529 account limits how much can be invested, where the money can be invested and how the assets must be used. A trust provides far more options.
However, these two options—the 529 and the trust—can be used in a combination that offers the best of both worlds. Let’s look at them both.
The 529 plan is great for tax-deferred asset growth. Funds can be taken out tax-free, as long as they are used for qualified educational expenses. As a result of changes to the law from the recent tax reform, you can use 529 funds for qualified educational expenses for elementary, middle, and high school tuition. For families sending their kids to private schools, this was a great change.
Investment options for 529 accounts are mutual funds or pre-designed portfolios that become more conservative, as the beneficiary gets closer to attending college. Investment caps are generally about $300,000 for the entire life of the plan, as opposed to annually.
If the funds are used for expenses that are not qualified, like buying a car for a student who will be living off campus and needs a car to get to and from school, there will be a 10% penalty on earnings and taxes to be paid.
A trust offers far more flexibility for all concerned. If the money is not completely used for education, the trustees might wish to give the child money for a down payment on a home, or to start up a business. The rules are set by the person creating the trust. You can even require the student to maintain a certain grade point average. The owner of the trust also determines who will pay taxes on the appreciated assets in the trust—the owner of the trust, the trust itself, or the beneficiaries.
Another tactic is to use the annual gift-tax exclusion to fund a 529 plan and put the balance of the money dedicated to a child’s college fund into a trust.
An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances and may include funding a college education.
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.