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Older Parents Face Different Estate and Financial Planning Needs

Wealthy celebrities may not have to worry about the financial side of welcoming babies in their senior years, but estate planning and retirement lifestyles for regular people need to be considered.

Older parents or couples, where one member is significantly older than the other, need to address their estate planning and asset division differently than those who are in the same age group. One example of this is Billy Joel, who has just welcomed his third child with his much younger fourth wife.

The 68-year-old Joel is already the father to two other children: a 31-year-old daughter with ex-wife Christie Brinkley and a 2-year-old daughter with his current wife, Alexis Roderick. CNBC’s recent article, “Billy Joel, 68, will soon be a new dad. What older parents need to know,” says that older parents need to consider specific estate and financial planning issues.

Grammy-award winning singer or not, a new dad should start planning now, even if you don't know how your family relationships may change with the addition of a new child. You can always change things later.

For a superstar like Billy Joel with a high public profile and substantial wealth, he might think about a Quiet Trust in a state that permits it, such as Delaware, Nevada, or Alaska. This type of trust allows a person to set aside assets and plan for how they will be divided without telling the beneficiaries. It also keeps those plans private, and there's less reporting to the people involved. Anyone with multiple children and former spouses should directly address all family members in their plan. Make certain that you address each individual to the degree you want to or don't want to, and if you don't want to, make it readily apparent.

Beyond age and physical challenges, the biggest issue for families in this situation is being certain that there will be enough money to provide for the younger spouse and the child.

To cover a child's needs into his or her mid-20s, a parent could easily use an additional $400,000. That can be a big surprise to the senior, more established member of the couple. That person, if planning for a family of moderate means, is going to have to set aside considerably more money for the younger people in the home. It can mean working longer for the older spouse and working more for the younger spouse. The couple can also plan for the more senior individual to boost Social Security payouts by delaying benefits until age 70.  However, that extra money is often not sufficient.

When the age difference between couples is 15 years or more, things can get complicated. Spouses need to have honest conversations about longevity, elder care issues and how they will handle being in very different stages of their work lives. Long-term care costs need to be addressed, as this cost alone could very easily decimate a lifetime of saving.

Reference: CNBC (October 18, 2017) “Billy Joel, 68, will soon be a new dad. What older parents need to know”

Progressive Approach to Elder Abuse Uses App to Help Protect Seniors

A new app will allow those who work with the elderly in Erie County, New York to report concerns about abuse and upload documents and photos.

Designed for service providers and advocates for seniors, the Legal Risk Detector app has been introduced through a joint effort from the Center for Elder Law & Justice, the Erie County District Attorney’s Office and the Erie County Office of Senior Services. The app, described in WIVB’s article, “New App Aims to Prevent Elder Abuse,” was first seen by dozens of providers at a local United Way building in Buffalo.

“This app is designed for Meals on Wheels people, home health aides, senior services workers and people who would be kind of the front line staff,” explained Karen Nicolson, Chief Executive Officer of the Center for Elder Law & Justice.

Those providers are sometimes the only individuals with whom home-bound seniors interact on a regular basis. Therefore, they can be the only people who recognize potential housing, consumer, financial exploitation or healthcare issues, provided they know the right questions to ask. That’s where the new app can help. The app is a comprehensive list of questions to ask elderly clients to help identify potential abuse. The questions are about everything from whether someone has been pressuring a senior to make changes to their power of attorney, to whether someone has been stopping them from accessing their money or health services.

 This app also lets providers upload photos and documents, which are added to the report generated by the seniors’ responses. A report will give the referrals that the provider may need to help the senior.  It is automatically sent to the Center for Elder Law & Justice, when any legal risk red flags are identified.

The Erie County District Attorney said his office has seen a number of cases of financial and physical elder abuse this year, which he attributes to the fact that many seniors don’t have their children living nearby to monitor them. He hopes that awareness spreads about the app and its ability to help identify problems, so would-be abusers will reconsider taking advantage of elderly victims.

While this particular app was created for use by providers and others who work closely with the elderly, another elder abuse risk detector app for use by members of the public is in development, funded by a national grant.

Reference: WIVB (October 30, 2017) “New App Aims to Prevent Elder Abuse”

How Making Provisions for End-of-Life Care Helps Loved Ones

Most people avoid making decisions about end-of-life care, which can make an emergency situation much tougher for family members, who must make decisions without the benefit of knowing what you would have wanted.

It’s unpleasant to think about, but apparently rocker Tom Petty did: he had thought about his end-of-life care and executed them using the correct legal documents. As a result, his wishes were followed. Most people don’t do this, and the emotional and financial costs, can mount quickly.

When Tom Petty was found in cardiac arrest earlier in October, his family reportedly took him off of life support pursuant to a do-not-resuscitate (DNR) order he had drafted, reports CNBC in its recent article, “What Tom Petty's choices can teach you about end-of-life care.” Petty could have drafted the DNR due to a known health condition or out of general concern.

A do-not-resuscitate order is a form signed by a doctor and used when a person suffers from a serious advanced illness. The form instructs health-care professionals not to perform CPR. Another consideration is a do not intubate order, which instructs medical personnel not to insert a tube into the body for breathing.

Both DNR and DNI forms can serve as components of an advance directive, which is created by an attorney and takes effect, if you can’t speak for yourself.

That can be the situation of a chronic end-stage disease, terminal illness or persistent vegetative state. One type of advance directive is a living will, which stipulates the kind of medical care you want to receive, like tube feeding, dialysis and pain management.

A major part of this plan is communicating with your health-care agent or surrogate—the person whom you’ve designated to make decisions for you. This involves detailing what you’d want to happen if you lost the ability to communicate or process bodily functions like swallowing, bathing or other functions. When your health-care surrogate knows what's important to you, they’ll be able to make better decisions for you.

If there is no plan in place and if the family members do not agree on a course of action, the battle over what comes next can land the family in an expensive and ugly court proceeding. A far better course of action is to complete all of these documents with an estate planning attorney, so that there are no questions about your wishes. Be wary of online forms, which may or may not be deemed acceptable by a medical facility.

Reference: CNBC (October 17, 2017) “What Tom Petty's choices can teach you about end-of-life care”

Overly Generous in 2017? Here’s What You Need to Know About Gift Taxes

There are a few basics you’ll want to know about gift taxes, especially if a gift inadvertently exceeded the annual $14,000 limit.

What would happen if a gift that started out at a value under the $14,000 annual limit was a gift of stock that, from the time you decided to gift it and until the transfer actually occurred, was valued at more than $14, 000? It’s actually not a big deal, as long as you follow the rules.

First, it’s important to understand that there are two very different sets of gifting laws that relate to estate planning, advises nj.com in its article, “When you gift over the annual limit.”

One set of gift rules is straightforward. For Medicaid qualification purposes, there’s absolutely no gifting permitted for five years prior to the program application. That’s seems to create a lot of confusion for people.

The second set of gifting rules concerning estate planning comes from the IRS. In 2017, the gift and estate tax exclusion is $5.49 million. That’s the lifetime exclusion, so an individual can leave $5.49 million to his or her heirs and not owe any federal estate or gift tax. A married couple can protect almost $11 million ($10.98 million) from federal estate and gift taxes.

The $14,000 limit is the most you can gift in any one year to any one person, without having to file an IRS 709 gift tax return. That amount has been set at that level since 2013. There’s no gift tax due, assuming you haven’t already exceeded the $5.49-million-dollar exemption.

However, if you exceed the $14,000 per person/per year limit, you must file a gift tax return.

While it may defy logic or just plain common sense, that’s the way the IRS does it.

The $5.49-million-dollar limit is a lifetime limit. The only way the IRS will know that you have or haven’t exceeded the exemption, is if you file a gift tax return every time you gift more than $14,000.

You see, the IRS is keeping track.

What should the person do if they accidentally made a gift that’s more than the $14,000 annual limit? Simple: file a gift tax return, and know that no tax will be due. It may be helpful to meet with an experienced estate planning attorney to explore various gifting strategies to manage tax liability and benefit your overall estate plan.

Reference: nj.com (October 18, 2017) “When you gift over the annual limit”

Not Sure How to Handle a Large Inheritance?

The responsibility of a large inheritance is one that many people take very seriously. Sometimes, this can be a stressful situation, even though that sounds unlikely.

Maybe you buy the occasional lottery ticket or hope for a windfall from a distant relative. But when a large inheritance arrives, it is often accompanied by major responsibilities.

For some people, a large inheritance may be the largest sum of money for which they’ve been responsible. There can be considerable pressure to use those assets wisely or in the manner that their predecessor would have wanted. Here are some things you should think about to wisely put those assets to work, courtesy of The Times Standard Business in “Business Sense: Inheritance — At a loss for your recent gain?”

Your inheritance is likely due in some way to well-prepared estate planning. That said, it’s a good time to secure those assets so they continue on the path you want, in case you pass away before the assets are used. Ask a qualified estate planning attorney about a trust or will, and if you have an estate plan, a large inheritance is good motivation to review the documents to be certain it’s up-to-date.

If you have minor children, it’s essential that you create an estate plan. This is because children under 18 can’t legally take outright possession of assets. Talk to an estate planning attorney about trusts and wills, guardianship, powers of attorney and maybe maintaining separate property.

Be sure that you have an adequate cash cushion for emergencies. This is usually three to six months of your expenses, depending on your situation.

A question of many recent inheritors is to whether or not they should either pay down debt or invest.  This really depends on your situation. Speak with your tax professional prior to putting a significant amount of your new funds towards your home loan or other major debts, because your money may be better off in an investment portfolio or tax-deferred retirement accounts.

Once your estate planning, tax planning and emergency cash plans are in place, then you can turn your attention to the task of investing, deciding if you want to make charitable contributions and considering how and if the inheritance should impact your pre-inheritance life.

Reference: (Eureka CA) Times Standard Business (September 30, 2017) “Business Sense: Inheritance — At a loss for your recent gain?”

Will You Live Forever? It’s A Common Estate Planning Mistake

We’re all mortal, but it’s a hard concept for many to imagine. That’s why many people put off estate planning. Do you really want to put your loved ones through the stress and costs of untangling your estate?

It’s often the experience of a friend or family member who is left to clean up the mess after someone has failed to do any estate planning that makes people aware of how important it is to plan ahead.

CBS Boston’s recent article, “More Money Mistakes: Thinking You Are Going To Live Forever,” reminds us that 50% of Americans with children don’t have a will and almost 75% of adults under the age of 34 don’t have one. According to a recent survey, 32% of Americans would rather do their taxes, get a root canal or give up sex for a month than create or update their will. In addition, more than 40% of Baby Boomers don’t have a will. Three reasons cited by respondents for not having a will are procrastination, believing they don’t need one and cost.

If you have assets that you’ve accumulated, like your home, savings or retirement accounts and you have kids, you have people and things you need to protect.

If you don’t have a will, the court will apply the intestacy laws where you are living at the time of your death to instruct who gets your estate and how it will be divided. Many times, it’s not the way the deceased would have planned it themselves.

If you’re single and have a significant other, and want to have him or her receive your assets, you have to plan. In many states, if you’re single and die without a will, your assets will go to your children, parents, siblings, or cousins—not your partner.

Lastly, the two documents you need while you are alive are a Durable Power of Attorney, appointing a trusted person to act for you in legal and financial matters, if you should become incapacitated due to illness or injury and, secondly, a Health Care Proxy. The Health Care Proxy lets you chose who will make medical treatment decisions on your behalf, if you are not able to do so. Think carefully about who to name for both of these documents. They do not have to be the same person. Speak with them and make sure they are comfortable with the responsibilities that you are asking them to take on.

Reference: CBS Boston (September 26, 2017) “More Money Mistakes: Thinking You Are Going To Live Forever”

Asking the Wrong Question About When to Retire

Deciding when you should retire should be guided by a number of factors, including when you can afford to retire and if you have a plan of what to do with the rest of your life.

In an ideal world, retirement income should be the driving force behind your decision when to retire, according to a recent article in Kiplinger, “Income, Not Age, Should Determine Your Retirement Date.” If you don’t have the income that will support the retirement lifestyle you want, you aren’t ready. That income is what will give you the independence that retirement is all about.

Get focused. Don’t think about just stopping work at 60, 65, or even 70, without a retirement income plan to pay your bills. People spend years focused on growing and saving their money, but fail to change their mindset as to how they’ll manage that money when they no longer have a paycheck. Instead, they choose an age—62, 65, 66, 70—one of several milestone years for Social Security and Medicare. Those are the ages when most people retire.

Go beyond savings. With the assistance of a wealth manager, begin examining your current fixed-income sources: Social Security, a defined-benefit pension (if applicable), or an annuity and how you can help maximize those with the proper timing and claiming strategies.

Make a budget. Create an approximate but realistic retirement budget. Major expense categories are mortgage and car payments (if applicable), food, transportation, and health care. You should also add in travel, gifts and hobbies. You might also need some services as you age, like yard work or nursing care.

After you calculate your fixed income and your budget needs, you can see if there’s a gap. If you have more than enough money to cover your expenses, you may be able to retire earlier than you thought.  However, if not, you’ll have to figure out how you’ll draw funds from your retirement fund to close that gap.

Stay open to changing circumstances. Change and unexpected twists are all part of life. You may have had a great plan, then something happens—it usually does, especially when retirement may last several decades. Start with well-designed plan, and be open to change, like a part time job or a relocation, and you increase the likelihood of a secure retirement.

Reference: Kiplinger (October 2017) “Income, Not Age, Should Determine Your Retirement Date”

Why Everyone Needs to Have Estate Planning

Estate planning covers far more than a will to distribute your assets on death. It also creates a plan for how you use assets while you are alive, how to protect your loved ones from unexpected events and conveying your wishes, if you become incapacitated.

Without an estate plan in place, would your spouse and heirs know what you wanted to happen if you became unable to communicate with them? Or if you died unexpectedly? One of the goals of estate planning is to share your thoughts and wishes. Another is to spare your heirs the costs and stress of guessing what you would have wanted to take place.

The McPherson Sentinel recently published an article, “Estate planning prevents headaches” that says there’s no way to determine your wishes regarding distribution of your property after your death, unless you take action before you pass away. Estate planning is worthwhile, regardless of the size of the estate.

Probate is the legal process by which the court validates the decedent’s will, if there is one, gives authority to the executor, or appoints an administrator if there’s no will. This process assures that taxes get paid, any property is distributed correctly and legally transfers the ownership of the property.

All property is subject to probate proceedings, with or without a will. The only exceptions are the following:

• Property owned in joint tenancy with another;
• Property placed in a trust;
• Property subject to a transfer on death deed;
• Payable on death accounts; or
• Life insurance proceeds designated for a named beneficiary.

Property in any of these categories automatically passes to the joint tenant, designated beneficiary or trust beneficiary.  However, these assets may be subject to inheritance and estate taxes.

Typically, a regular probate proceeding can take a minimum of six months from the date the interested parties receive notice to file their claims against the estate. Some states have more streamlined and simplified proceedings that are less time-consuming which can be used in certain situations.

The cost of the probate proceedings depends upon the complexity and value of the estate. In Kansas, fees for the attorney and executor or administrator are also charged to the estate.

An estate planning attorney can assist you in creating your estate plan, including what options you’d like to use to avoid probate. Transfer on death deeds, naming beneficiaries to bank accounts, mutual funds, bonds, CDs and life insurance funds can all be transferred to heirs. However, to avoid probate, they have to be handled properly and according to the laws of your state.

Reference: McPherson (KS) Sentinel (September 29, 2017) “Estate planning prevents headaches”

Avoid These Four Retirement Snafus

Miss these four factors and even the best retirement plan will fall apart fast. Spare yourself and your loved ones the high costs and stress that take many people by surprise.

If you don’t plan for these big four elements of retirement costs, all of your hard work in planning for retirement—not to mention a lifetime of saving and investing—could easily evaporate. When savings are consumed by unexpected costs, retirements can be ruined. A recent article in Motley Fool, “4 Retirement Issues You're Probably Not Planning For,” provides practical and actionable information.

Inflation. Inflation is the quiet retirement-killer. It is the reason why a dollar won't buy as much today as it would 20 years ago. Inflation has averaged around 3% per year since the government began tracking it in 1913.  Therefore, you can assume that your retirement savings will lose about 3% of their value every year. It is possible to beat inflation by selecting investments that will produce high enough returns to outpace the loss of your money's value. Stocks historically are the only investment to reliably beat inflation year after year: large-cap stocks produce an average return of around 10% before inflation over the past century. This is considered by many to be a good reason for retirees to keep some money in stocks, despite their volatility.

Taxes. If your retirement plan doesn't consider future taxes, your budget could be wrecked. Think about how you can minimize the amount of income you give to the government. The best way to go might be a Roth IRA. With a significant percentage of your retirement savings in a Roth, you’ll have greater control over how much income tax you pay each year. It also minimizes your required minimum distributions and allows your investments to grow tax-free, for as long as they are in the account.

Estate Planning. Without at least minimal estate planning, you place a terrific burden on your family. It could also mean that your beneficiaries will have greater expenses, like administrator's fees and other legal fees that will come out of your estate. The essentials of an estate plan are a will, naming beneficiaries for all your accounts, and a power of attorney in case you become incapacitated, along with an advance medical directive to direct the types of extreme lifesaving measures you want your physicians to undertake if you're incapacitated. You should also ask your estate planning attorney about setting up trusts to manage probate issues and estate taxes.

The High Cost of Long-Term Care. Don’t make the common mistake of relying on Medicare to pay for long term care. The average cost of long term care is around $130,000. Unless there’s a clear medical necessity, Medicare only covers the first 100 days. Buy long term care insurance while you are relatively young and healthy, so that premiums can be manageable. It is better to have a fixed item in your budget than the unexpected massive costs of long term care.

If you miss these in the planning process, it’s possible that your retirement income and quality of life during retirement may be different—and not in a good way—from what you had envisioned.

Reference: Motley Fool (October 1, 2017) “4 Retirement Issues You're Probably Not Planning For”

Here’s a World-Famous Artist with a Planned Approach to Creating a Legacy

Not all creative souls chose to ignore the details of their eventual passing. Famed painter Jasper Johns has created a plan that will foster creativity and continue his support for the arts in the future.

A recent article in US News, “Jasper Johns to Leave Connecticut Estate for Artists Retreat,” reports that Jasper Johns, one of America’s most famous artists, has mapped out a plan for his country estate in Litchfield County, Connecticut to become an artist’s retreat.

The 87-year-old painter, who has lived and worked in the town of Sharon for the last twenty years, received approval recently for his property to host as many as twenty-four artists at a time to live, share meals together and work on their craft.

In the small Connecticut town, some see his decision as a boost for the lively local arts scene,  since art studios are present in the community of 3,000 people where Johns is a towering, if seldom-seen, figure.

"I really think that's the best use of that property, because it extends his legacy," First Selectman Brent Colley said. "A lot of us never see him. He never comes out.  However, he employs a lot of people and he's been a great asset to the town."

Johns is thought of as a major influence on pop, minimalist and conceptual art through his work dealing with themes of perception and identity. His textured images of American flags became icons of modern art, and he was honored by President Obama with a Presidential Medal of Freedom in 2010.

The town planning commission approved the proposal this summer after the artist’s representative asked for the exception to zoning rules now. This was because he knew that the town's position woulde help with his estate planning, according to the minutes from the planning commission’s hearing.

The estate plan details a design for a retreat, set up as a charitable or nonprofit organization, with twenty employees. The property is close to the town's main marketplace and consists of six parcels of land, including some with residences.

Planners said there’s no additional construction planned, although some barns may need to be converted to studios. In addition to the property, Johns plans to provide an endowment for the artist retreat.

In recent years, Johns has been buying and improving his property. His efforts have been welcomed and appreciated by members of the town.

Reference: US News (September 20, 2017) “Jasper Johns to Leave Connecticut Estate for Artists Retreat”