Beyond wills and trusts, planning for the future should also include two advance directive documents—a living will and a health care proxy—that would take effect if you were unable to dictate your own medical care. Everyone, both yourself and any aging family members, should have both documents properly filled out, witnessed, and on file with health care providers as well as at home. [Read more...]
Financial Steps In Your Forties
October 11, 2012 by ·
Your fortieth birthday is a good opportunity to take stock of life, including your financial life. Many people have achieved, or made plans to achieve, various milestones—getting married, buying a home, starting a family or preparing for the kids’ education. Now it’s time to look ahead. Your future financial success will rise from the bedrock of the careful planning you do now. Let’s look at three important areas—income protection, estate planning and your vision of financial independence. [Read more...]
Is it Time for an Estate Plan Checkup?
July 6, 2012 by ·
Is your estate plan current? Your financial needs and personal situation will change over time. A regular checkup of your estate plan can remind you to take care of certain important details, such as revising your will or changing beneficiary designations, and will help prevent unintended consequences.
Here are some common situations or events that should prompt you to review your estate plan.
Change in Asset Values
Your estate may include assets that have grown in value since you established your estate plan. Perhaps you have acquired more property or sold your business. Your present plan may no longer accomplish the objectives you originally intended, such as protecting particular assets and minimizing taxes. If that is the case, you may want to give more to charity and/or increase the amount you plan to leave to loved ones. An estate plan review can help put your plan back on target.
You should also review your estate plan if the value of your estate has decreased or if you’ve made specific gifts in your will of assets that you no longer own. After all, you don’t want to leave any of your intended beneficiaries empty-handed.
Change in Family Size
Births, deaths, marriages, divorces—any of these events could change how you want your assets distributed. While a birth or marriage may add a potential beneficiary to your estate, a death or divorce is likely to have the opposite effect.
Retirement
Making the transition to retirement provides an ideal opportunity to review your estate plan. Although your retirement may not have an immediate impact on your estate plan, it will have an eventual effect. Instead of adding to your retirement savings, you may begin withdrawing assets for retirement income. Knowing your retirement income resources can help you decide when, and if, it is possible to transfer property to your family and other beneficiaries.
Relocation to a Different State
State and death tax laws differ from state to state. If you move to another state, you should find out the rules of your new state and have your plan revised accordingly.
Tax Law Changes
Changes in the tax laws can render your estate plan outdated. Make sure your estate plan is compatible with current law and that it adequately reflects your wishes.
Major life events and changing tax laws make it a priority to have your estate plan reviewed by a professional on a regular basis.
You Can’t Take It With You: Estate Plan Basics
December 23, 2011 by ·
Estate planning is a gift that everyone should give to their loved ones. If you have no estate plan when you die, you risk plunging your family into financial and legal chaos. But armed with a plan, your family will know your final wishes.
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Your Final Instructions
November 19, 2011 by ·
Everyone needs a will, but a will is a legal document that can’t cover all the nuances of a person’s life. To complement your will, it’s generally a good idea to draw up a letter of instruction.
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Who’s Your Beneficiary?
July 30, 2011 by ·
When you joined your employer’s retirement plan, you probably named a beneficiary for your plan account and quickly forgot about it. You should take time to review your retirement account beneficiary designation every so often. You may find that you want (or need) to change it.
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Memory Loss—Not Money Loss
July 30, 2011 by ·
One of the hardest things in life is to lose someone we love to Alzheimer’s disease or another form of dementia. In this slow-motion tragedy, the partner who once was so strong or the parent who took care of us simply disappears.
Dementia doesn’t just devastate families, either. When the family money manager loses the ability to understand money, it can devastate finances as well. How can you help keep your loved ones safe, and safeguard the assets your family will need in the future?
If you believe that a family member is at risk, there are things you can do now to help form a safety net.
Share the Burden
One person should never be responsible for an entire family’s finances. (That’s a good rule of thumb at any point in life.) Get involved:
- Pay bills, review statements, etc. with your partner.
- Find out where your parents keep their important financial documents and who their financial professionals are.
- Check with the bank to make sure that bills are not being paid more than once.
- Become a co-signer on a checking account.
- Look into online banking and bill-paying to standardize as many financial activities as possible.
- If the person is willing, obtain a power of attorney for all money matters.
Be Vigilant
You can find the ten early detection signs of Alzheimer’s disease online. Thanks to the work of the University of Alabama at Birmingham’s Alzheimer’s Disease Center, I’d add an 11th: Confusion over money. UAB researchers believe that financial capacity is one of the key activities of daily living.
Watch for unusual financial behavior. Ask questions if you think something might be wrong. Be diplomatic; you don’t want to take away anyone’s independence or dignity.
Unfortunately, your loved one’s attorney or accountant might not be able to provide information on a client’s behavior, as they are bound by the dictates of confidentiality.
Don’t Wait for a Diagnosis
When you do your long-term estate planning, keep the following indicators in mind:
- The risk of developing Alzheimer’s doubles every five years after the age of 65.
- After 85, the risk approaches 50 percent.
- People who had parents or siblings who developed this disease are more likely to develop it themselves.
- Health issues (head trauma, heart and circulatory problems, diabetes, etc.) increase the risk of dementia.
Let’s Work out a Plan
If you or someone you know is faced with this situation, I can help you find resources such as long-term care policies, Medicaid planning and more. I work with a network of professionals who can help you establish medical and durable powers of attorney or create and update wills and living wills. Let me know if I can provide a referral.
There are many stories of families who lost their assets when the family breadwinner lost his or her understanding of how to handle money. But these stories are not inevitable. Allow me to help you protect your family’s finances when dementia strikes.
Honor Thy Parents
July 30, 2011 by ·
The increase in life expectancy in the United States has led to an unexpected consequence—the emergence of the “sandwich generation.” This term, which first appeared in 1987, describes adults who care for both their children and their aging parents.
If you’re a member of the sandwich generation, you know that one day you’ll have to talk to your parents about their money. Perhaps you are dreading that day. No matter how old you are, you may still see yourself as a kid, not a peer. Your parents may feel the same way and they could be uncomfortable talking to you about money, wills and cemetery plots.
As your parents age it becomes increasingly important that you start this conversation and keep it going, no matter how awkward it proves to be. As with all financial matters, the two best words of advice I can give you are: Start Now.
Break the Ice
Be direct and respectful and start small. For example, ask your parents for contact information in the event of an emergency. Then try to obtain the following in one or more friendly discussions:
Essential Records
Where do your parents keep birth certificates, deeds, wills, health and life insurance policies and tax returns? If they have a safe deposit box, safe or locked filing cabinet, obtain access.
Contact Information
This includes doctors, insurance agents, lawyers and financial professionals. Don’t forget the neighbors, who can be helpful if you live far away.
Financial Information
Which institution(s) hold their assets? What are the account numbers, online user names and passwords?
These conversations might be as helpful to Mom and Dad as they are to you. Becoming involved in your parents’ finances might help them refine their ideas and might also give you ideas for your own retirement.
Become Proactive
You can build on the basics of your parents’ situation to find powerful ways to help them. In particular, address these topics to assist and protect your parents:
Durable Power of Attorney
The financial power of attorney authorizes you to handle your parents’ money, from paying bills to distributing their assets according to their wishes. The health care power of attorney (also called a health care proxy) gives you the ability to make medical decisions when your parents can’t. You need both types. Without them, you could be facing a long, expensive and emotional journey through the court system.
Wills
Do your parents have a will? If so, have they updated it to reflect changes in your family or in the tax law? If not, help them find an estate planning attorney.
Medical Insurance
Do they have health care benefits other than Medicare? Long-term care insurance can help with at-home care or with an assisted-living facility or nursing home.
Protection from Fraud
Sadly, crimes against older Americans are escalating. Most victims are between the ages of 80 and 89, live alone, and require some help with either health care or home maintenance. You can help safeguard your parents by asking about undeposited checks, unpaid bills, unexplained transfers and abrupt changes in their will or other financial documents. These patterns might point to the influence of a person you’ve been unaware of, or to the onset of dementia or Alzheimer’s disease.
The Toughest Questions
No one likes to contemplate mortality, but at some point you and your parents will have to consider end-of-life issues.
Living Arrangements
Will your parents be able to care for themselves in their home without assistance? Should they be thinking about a smaller home, a retirement center, or an assisted living facility or nursing home?
Living Wills
You don’t want to guess about life and death when your parents are unable to speak for themselves. A living will (or an advanced medical directive) is a guideline for what life-saving measures your parents would like should they become seriously ill.
Put Yourself in Your Parents’ Shoes
Think of how you would want to be addressed if you were in their situation. Make your conversations a two-way street and not a confrontation. Even if your parents won’t involve you in their finances right away, if you keep the lines of communication open you will all come out ahead. Hopefully over time your conversations will help everyone involved create peace of mind. And peace of mind, in any financial calculation, is invaluable.
A New Roadmap for Estate Planning
July 30, 2011 by ·
If it’s true that nothing is certain but death and taxes, someone neglected to tell the U.S. government. Last year, Congress passed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. Among other things, this act will have a major, three-part impact on all “transfer taxes” (estate, gift, and generation-skipping taxes):
- The gift-tax exemption has jumped from $1 million to $5 million for individuals and from $2 million to $10 million for couples.
- The top tax rate for assets above the exemption has fallen from 55 percent to 35 percent.
- Married couples can take advantage of new portability rights. A surviving spouse can add the deceased spouse’s unused exemption amount to his or her own.
This means transfer taxes have been unified. The tax burden has been considerably lessened. You can shield a $5 million gift from federal gift and estate taxes. And you don’t need complicated wills in the era of portability, do you? Sounds like a bonanza!
Well…maybe.
The Clock Is Ticking
The new tax regime only applies to the years 2011 and 2012 (with options for 2010 estates). Congress must act before December 31, 2012 or the tax code will revert to the previous, higher rates. As the law is currently written, the exemption might fall to $1 million with a top tax rate of 55 percent. Additionally, portability is scheduled to disappear when this act does, as discussed below.
All About Portability
Portability seems simple at first. For example, if a husband dies with $4 million in assets, his wife can add his unused $1 million to her $5 million exemption. At her death she can exclude $6 million of her own assets.
But the dollar value of the estate in this example is just one factor. There are also the couple’s circumstances to consider. If they are in their 50s, the wife might easily outlive her husband by decades. Their estate will continue to appreciate, making portability an attractive option. But if they are in their 80s and their total estate is less than $5 million, portability might be unnecessary.
In addition, portability only applies to surviving spouses. Remarriage complicates the picture. And though the new law unifies transfer taxes, portability cannot be used with the generation-skipping tax exemption. So don’t simplify those wills just yet.
The States Step In, the Feds Claw Back
States impose their own estate taxes, with exemptions lower than the federal government’s. Sheltering your exemption or exemptions in an estate in 2011 or 2012 might lead to serious state tax consequences.
Finally, if Congress doesn’t grandfather in gifts made now, after 2013 the revised law might “claw back” gifts greater than whatever the next exemption will be.
Nothing Takes the Place of Thoughtful Planning
That’s the one thing we can be sure of under any tax regime. Here’s how I see things:
- Update your existing estate plan. You have more assets than you think: for example, your IRA, 401(k), pension and life insurance.
- Look at your specific assets. Consider which might be the best to gift and the best to retain, given your comfort level and what you can afford.
- No plan? Make one! If you die without a will in 2011 or 2012, and if you don’t hold your assets jointly with your spouse, your state’s intestacy laws will control the distribution of your assets. Portions of your assets might not transfer to your surviving spouse.
- Update your beneficiary designations in your life insurance and retirement plans. If you haven’t already done so, make contingency designations. Don’t rely on your employer to hold this information, keep a copy yourself. Companies can be bought and sold and records can go astray.
There’s no point in jumping just because the law has changed. Nor should you assume that you’re safe because your estate fits within the $5 million exemption. I’d be happy to talk to you about the best course of action under current tax laws for you and your family.
A Complicated Inheritance: IRAs
July 10, 2011 by ·
Inheriting an individual retirement account (IRA) can be complicated and particularly stressful if you’ve just lost a loved one. Having an idea of what you need to do can help avoid the potential missteps associated with an IRA inheritance.
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