Barnes Lipscomb & Stewart PLLC

What Does an Executor Do?

If you’ve been asked to serve as an executor of an estate, it will be important for you to understand your responsibilities. It is both an honor to be asked to carry out your family member or friend’s final wishes, but it is also a lot of work.

A useful article appearing on WMUR, “Settling an estate,” explains that an executor is the person designed in an individuals’ will to distribute their property, pay any debts or expenses and make sure that the estate’s tax returns are filed.

When an executor isn’t willing or able to perform his or her duties, there’s usually an alternative. If no alternative has been named, the courts will approve an executor for the estate.

Being the executor of an estate can be a difficult and time-consuming task. In some instances, the deceased may have left a letter of instruction that will make the process easier. The letter may contain information such as a list of documents and their locations, contact info for attorneys, accountants, financial planners, a list of creditors, login information for important web sites and final burial wishes.

The will is usually located with these documents. The executor will need to obtain a copy, and read and understand the contents. A review of the will with an estate planning attorney is done in order to decide which type of probate is necessary. An inventory of assets owned by the deceased is then taken by the executor and may be required by the probate court. Some of the assets may need to be appraised. After probate is finished, the assets may be sold or gifted, according to the deceased’s wishes.

Asset protection is a major concern at this time.  It may include changing locks on property. The executor will likely need to pay mortgages, utility bills and maintenance costs on property. He or she will need to change the name on the home and auto insurance policies, and brokerage accounts will need to be retitled.

Final expenses also need to be paid. The funeral home or coroner will provide death certificates that will be needed for various tasks in the future, such as filing life insurance claims. If the deceased was collecting Social Security for example, the agency will need to know of the death, so benefit checks can be stopped. Checks received after the death will need to be returned. A final federal and state tax return for the deceased may also need to be filed, along with an estate and gift tax return.

The executor is responsible for the management and distribution of assets (known as the “fiduciary duty”), while dealing with the emotions of a grieving family. To ensure that the executor’s tasks are completed properly, it may be helpful to enlisting the advice and guidance of an experienced estate planning attorney.

Reference: WMUR (May 24, 2018) “Settling an estate”

Navigating the Do’s and Don’ts of Annuities and Medicaid Eligibility

Decisions about annuities need to take into consideration the possibility that you or your spouse may need long-term care. Some annuities may be helpful, but others could make you ineligible for Medicaid. Proceed with caution.

If a financial advisor is talking to you about annuities, remember that any decision needs to be in alignment with your overall estate plan, and that includes planning for the possibility of Medicaid. Certain annuities will be considered a resource available for payment of medical costs, which could make you or your spouse ineligible for Medicaid, according to a recent article in Financial Advisor, “Annuities Can Help or Harm Medicaid Eligibility.”

An annuity can help with Medicaid eligibility by transforming otherwise countable assets, like savings accounts, into a non-countable income stream, which will shield the assets for heirs, while spending down what counts against you in Medicaid eligibility. A good type of annuity for this is the Single Premium Immediate Annuity (SPIA). It’s the simplest, most transparent type of fixed annuity. It has a lump-sum premium payment at the start and a predetermined, contracted payback schedule. In contrast, variable annuities invest in a range of securities that don't have guaranteed returns.

However, the use of annuities in Medicaid planning is complex. Years ago, these annuities were treated more favorably. In 2006, federal law was amended to limit the ability to benefit from these annuities. The Deficit Reduction Act (DRA) of 2005 introduced new rules to limit the transfer of assets for purposes of gaining Medicaid eligibility. Nevertheless, there are still some uses for SPIAs in Medicaid planning.

Generally, to assist with Medicaid eligibility, a SPIA must be non-cancelable, non-assignable and actuarially sound. Therefore, it must be irrevocable, and the funds stay in the annuity, except for contracted monthly payments. Second, the annuitant must receive back at least as much as was paid into the annuity during his or her actuarial life expectancy. If there’s a guaranteed minimum number of payments, it can’t exceed that actuarial life expectancy. Finally, the DRA says that annuities must name the state as beneficiary for at least the value of the Medicaid assistance received (there may be an exception for a disabled child).

Therefore, you can convert an asset into an income stream, but you can't change it back. The income rules must also be analyzed, to see if the additional income will be a problem. If the annuity can be converted to a lump sum or sold for a lump sum, Medicaid still treats it as an asset. This is the reason why most annuities don’t work for Medicaid purposes.

The rules are clearly structured to discourage the use of annuities, where Medicaid is concerned. The overriding principle is simple: the state would prefer people to use their own funds to pay for their care, before the state begins to cover the cost. Because rules are not uniform nationwide, speak with an elder care attorney in your state before making a decision about an annuity purchase.

Reference: Financial Advisor (May 11, 2018) “Annuities Can Help or Harm Medicaid Eligibility”

Planning for a Disabled Child and an Inheritance

Parents of special needs children must plan carefully for their children’s lives, after the parents are gone. If there is an inheritance in the future, means-tested benefits could be lost, unless proper planning takes place.

Parents who have devoted their lives to providing care to disabled adult children worry about what will happen, when they are gone. If an adult child depends upon support services provided by Medicaid, a Supplemental Needs Trust may be needed to ensure that any inheritance does not put those services at risk.

Kiplinger’s article, “How to Plan Ahead for a Disabled Child’s Inheritance,” notes that, without a controlled environment and attentive support system that parents carefully construct and protect, a special needs child’s world would fall apart.

Many of these individuals are entitled to means-tested benefits, like Medicaid or a Medicaid waiver program, Supplemental Social Security Income, Supplemental Nutrition Assistance Program, the Housing Choice Voucher Program and other services essential to their support system.

The issue for many of these parents is to ensure that their children will sustain their secure and protected lifestyle, without losing eligibility for essential means-tested benefits or having someone take advantage of him when the parents are gone. With the help of a qualified elder law attorney, parents can direct the inheritance of a child with special needs to a Supplemental Needs Trust. It’s a federally-approved strategy that will shelter those funds from creditors, secure them against waste and malfeasance, and exempt them from income and resource limitations, so the child can access the programs that will help ensure a productive and enjoyable life.

To qualify, a Supplemental Needs Trust must serve just one beneficiary for life. It must include specific terms and legal references, provide certain trust powers and limitations and weigh the loss of eligibility against the benefit of each non-supplemental distribution. The various federal and state programs usually cover housing, food, utilities, medical care and medicines. A Supplemental Needs Trust can pay for all non-covered medical, ophthalmological and dental care, private rehabilitation training, services or devices, supplementary education assistance, entertainment, hobbies, transportation, personal property and personal services.

The rules governing trust distributions are very strict. Structuring a successful Supplemental Needs Trust requires an elder law attorney who is experienced in state and federal program laws, with a very solid understanding of the state office’s interpretation of the regulations and local program directives, as well as an informed relationship with the local program decision-makers. He or she should also stay on top of changes in the law, by attending continuing legal education courses.

A qualified trustee is also an important part of planning for the future. This person will need to understand that public assistance programs can be challenging to navigate, must understand how the trust works and know when they are in over their head and need the help of an elder lawyer. They must also know when and how to make distributions that are in the best interest of the beneficiary and in compliance with the rules for the trust and for government benefits.

Reference: Kiplinger (May 16, 2018) “How to Plan Ahead for a Disabled Child’s Inheritance”

Do Your Homework Before Rolling a 401(k) Into a New Employer’s Plan

There may be better options than just moving the account from one employer’s plan to another. Learn about your options and consider fees and taxes first.

What most people do when changing jobs, is simply have their retirement funds from the previous employer’s 401(k) plan transferred to the current employer’s retirement plan. It’s fast, it’s usually seamless and it’s one less thing to do when adjusting to a new position in a new company. But is it the right move? Not always.

As reported in a recent article from CNBC, “New job? How to become a retirement-plan rollover champ,” there's no single answer for every situation. Each individual person will need to determine the right solution. The article does provide six options to consider.

1. Roll over into a new IRA. Transferring funds from a previous 401(k) into a new IRA, preserves the most investing flexibility. Company plans may restrict options to a handful of mutual funds, but an IRA allows an investor to select almost anything—from bank certificates of deposit to real estate. However, a 401(k) usually has lower costs than an IRA. As long as the 401(k) account holder is still employed, he or she can borrow from it.
2. Keep your funds in a former employer's plan. In some cases, it is best to leave retirement funds in a former employer's plan, rather than transfer them to a new employer's plan. That may be true if the old plan has lower investment costs or better investment choices than the new employer plan.
3. Transfer to a new company plan. Transferring 401(k) funds to a new company-sponsored retirement plan can be better than leaving them where they are, if the new plan has more investment choices or lower fees. It may also be wiser than transferring to a new IRA, because of advantages a 401(k) has over an IRA, like the ability to borrow against account funds. Savers who have reached age 55 and stopped working, can withdraw 401(k) funds without having to pay the 10% penalty otherwise imposed on early IRA withdrawals.
4. The In-plan Roth conversion. Some plans allow you to transfer all or some of a 401(k) plan's funds into a Roth account within the same plan, saving on taxes long-term. That’s because the future Roth 401(k) distributions won't be subject to taxes. However, the downside is that the account holder must pay income taxes on the amount converted. The account holder's age is another key consideration. A younger person can pay taxes on a Roth conversion and then watch the remainder grow tax-free until retirement, but a senior doesn’t enjoy that same benefit.
5. Withdraw the funds and convert to a new Roth IRA. You could take your money from an ex-employer's retirement account and use it to fund a new Roth IRA outside the plan can, like a transfer to a new IRA, increase investment flexibility over an in-plan conversion. When compared to a similarly flexible IRA, an out-of-plan Roth has attractive long-term estate planning benefits.
6. Take the entire amount as a lump sum, pay tax and put it in a brokerage account. This is very rarely recommended, since it is only a good move, if the plan contains employer stock. Here’s why: when transferred from a tax-advantaged account, the difference between the share’s current value and their net unrealized appreciation (their average cost) might be taxed as capital gains, rather than ordinary income. Don’t do this unless you have really good records and can prove prices at which the shares were acquired.

Generally speaking, it is recommended that you take time to review your options and make sure you are not making a decision based on emotions, especially if you’ve been unexpectedly laid off or fired.

Reference: CNBC (May 23, 2018) “New job? How to become a retirement-plan rollover champ”

DJ Casey Kasem’s Daughter Shares Her Family’s Legacy and Battle for Elder Abuse Laws

A radio personality in her own right, Kerri Kasem and her siblings were kept away from their famous father at the end of his life. That experience led them to fight for change, and to create a law that has been adopted in twelve states.

After Kerri Kasem and her siblings were prevented from visiting her father, while he was sick and dying by her stepmother, they launched an initiative to prevent any other family from having that experience. She recently spoke at the Seventh Annual Training of the Greater Augusta Coalition Against Adult Abuse, held in the Waynesboro, VA area. The News Virginian reported in its story, “Kasem speaks against elder abuse,” that Kasem presented “Isolated: How Casey Kasem’s Family fought, changed the law, and survived.”

Like her father, Kerri Kasem is an American radio personality. She hosted Sixx Sense and The Side Show Countdown with Nikki Sixx.

Kasem relayed her family’s story of the fight to see her ailing father. She explained about early warning signs of abuse and prevention. She also provided tips on how law enforcement and Adult Protective Services should approach these cases, for the victim’s rights to be protected.

“I learned very quickly there are no laws in the U.S. protecting adult children,” she said. “There needs to be stronger laws in this country protecting our elderly.”

Kasem fought to see her father and eventually created the Kasem Cares Visitation Legislation. The bill “provides an open path for family members to ask the court to rule on visitation, without incurring the enormous expense and time that comes with a challenge to guardianship or conservatorship,” the website explains. The bill became law in twelve states.

The organization is advocating for changes in the laws in Alabama, Arkansas, California, Illinois, Iowa, Louisiana, Maryland, Nebraska, Texas, Wisconsin and Virginia.

During her fight, many people contacted her in letters saying they were going through the same ordeal. She hopes the legislation and the Kasem Cares Foundation will help other people.

“I knew there were so many families going through this,” she said. “I couldn’t let them go through that. I knew I had to do something. That’s why I created Kasem Cares.”

The Kasem Cares Foundation addresses the experiences of families who need protection from elder abuse, regardless of their financial status. It focuses on the needs of adult family members to try to protect ailing relatives, whose lives are being controlled by someone who restricts their access to a vulnerable adult.

Reference: The News Virginian (May 13, 2018) “Kasem speaks against elder abuse”

How Baby Boomers and Entrepreneurs Put Their Retirements at Risk

Is starting a business part of your retirement dream? Many boomers start a passion-fueled business during retirement, thinking they’ll earn big bucks, while finally doing what they’ve always dreamed of.

The number of boomers launching businesses is on the rise, with boomers now twice as likely to plan on starting a business as millennials, as reported by the Kaufman Foundation. The one thing they both have in common: putting retirement savings on a back burner.

US News & World Report’s recent article, “7 Reasons Entrepreneurs Don't Save for Retirement,” examines some of the biggest mistakes entrepreneurs make when it comes to retirement planning.

1. No plan. Some business owners say they’re just too busy to plan, whether it's business planning, estate planning or financial planning. About 34% of small businesses owners don't have a retirement savings plan, according to a 2017 survey of 1,960 small business owners by Manta, an online resource for small businesses owners. However, setting up a retirement account offers benefits like tax breaks and the ability to earn compound interest.
2. Putting everything back into the business. Entrepreneurs won’t put their money into retirement because they worry they’ll lose quick access if they need it for the business. However, diversifying your assets can help you to better handle emergencies and save for the future.
3. Believing that the sale of the business is the retirement plan. Most entrepreneurs overestimate the value of their business and their ability to sell it, when they’re ready to retire. It may not be that easy. Plan with your head and not your heart—take the emotion out of it, and plan conservatively.
4. Poor business structure. Some entrepreneurs begin as sole proprietors and remain sole proprietors. However, not structuring your company as an LLC, can put your personal assets at risk. That can put your retirement at risk.
5. Not diversifying. If most of your net worth is in the business, you should seek out low risk investments for money outside the business and be sure to contribute to your own retirement plan, besides investing in the business.
6. Failing to save. Business owners can save up to 25% of their compensation or $55,000, whichever is less, in a SEP-IRA in 2018.
7. Funding a new business with retirement savings. Starting a business is a risky venture. Using retirement funds later in life, could lead to a financial disaster. If the business does not succeed, you are not likely to be able to make up a lifetime of savings, investment growth or interest income during retirement.

Reference: US News & World Report (May 11, 2018) “7 Reasons Entrepreneurs Don't Save for Retirement”

Olivia de Havilland Loses Suit Against Docudrama Producers

It’s not always easy being a household name. Screen legend Olivia de Havilland filed a lawsuit against FX and show creator Ryan Murphy, saying that they used her likeness without permission and should have paid her. However, the appeals court disagreed.

She appears for all of 17 minutes in the docudrama, “Feud: Bette and Joan,” but film star de Havilland does not “own history,” ruled the Second District Court of Appeals in a 38-page opinion. Screenwriters and producers breathed a sigh of relief.

The Washington Post’s recent article, “Olivia de Havilland’s lawsuit against ‘Feud’ creators gets tossed: She ‘does not own history,’” reported that the decision is a win not just for FX and Murphy, but also for all screenwriters and producers. If the court ruled in de Havilland’s favor, it could’ve meant that other public figures could file aggressive legal challenges, if they didn’t like the way they were portrayed in fictional works.

“Whether a person portrayed in one of these expressive works is a world-renowned film star—‘a living legend’—or a person no one knows, she or he does not own history,” the three-judge panel ruled. “Nor does she or he have the legal right to control, dictate, approve, disapprove, or veto the creator’s portrayal of actual people.”

The 101-year-old De Havilland was a product of Hollywood’s golden age, the period spanning from the end of silent films to the late 1950s. She portrayed Melanie Hamilton, Scarlett O’Hara’s sister-in-law in “Gone with the Wind,” and Maid Marian in “The Adventures of Robin Hood.” These roles paved the way for her stardom in the late-1930s, and she went on to win two Oscars.

“Feud,” which debuted in March 2017, was a dramatized version of the intense rivalry between Bette Davis and Joan Crawford during the filming of the 1962 thriller “Whatever Happened to Baby Jane?” De Havilland, a close friend of Davis, was played by Catherine Zeta-Jones. The show was nominated for 18 Emmy awards. Although the role of de Havilland was only 17 minutes of screen time in the eight-episode series, she filed suit against FX and Murphy last June, claiming that she was unfairly portrayed as a vulgar gossip-peddler and arguing they didn’t have permission to use her as a character.

The trial court allowed the case to proceed last fall, but the Court of Appeals court reversed the lower court’s ruling and ordered the case dismissed, holding that the show was constitutionally protected as a fictionalized work based on real-life events.

The First Amendment protects authors who take real-life stories and transform them into fictional works. The result may have been different if FX had used de Havilland’s name or likeness to sell physical merchandise, according to the opinion. However, in this case, FX was safe because “Feud” was “transformative.” The TV show was a creative work that drew from a variety of source material and didn’t derive its value principally from de Havilland’s celebrity.

The court description of the de Havilland character was flattering. The lengthy opinion included a description of her character as “beautiful, glamorous, self-assured and considerably ahead of her time, in her views on the importance of equality and respect for women in Hollywood.”

Despite these kind words, de Havilland’s attorney Suzelle Smith said the ruling was a “pro-industry decision” and that the actress would appeal the decision.

Reference: Washington Post (March 27, 2018) “Olivia de Havilland’s lawsuit against ‘Feud’ creators gets tossed: She ‘does not own history’”

Estate Planning Mistakes You Can Fix Before They Get Expensive

Not having an estate plan in place, makes seniors vulnerable to financial elder abuse.

Are you among the 60% of Americans 60 years old and older who don’t have estate planning documents in place, or the 40% who understand how important it is to protect themselves and their families? If you’re in the bigger group, the time to address these matters is now.

CNBC’s recent article, “These costly estate planning mistakes can be fixed,” says that, when it comes to planning for your estate, the odds are you haven't made all the provisions you should.

A new Wells Fargo survey found that four in ten senior Americans don’t have the important documents that will address financial and health matters, if they’re incapacitated or dying. Those gaps in financial planning have the potential to leave the elderly vulnerable to elder financial abuse. While 20% of Americans age 65 and up are victims of financial abuse, only one in 10 think it can happen to them. Consider these actions you can take now to reduce your financial vulnerability.

Store your documents in an accessible place. Your estate plan and other important documents should be stored in a secure but accessible location. There are programs that allow you to create and store your plans online.  As a result, everything is in one place and accessible to family out-of-state.

Break down your to-do list into small items. Make a list of the items of your estate plan that need your attention and work your way down the list. The four key documents everyone should have in place are a will, a power of attorney for financial matters, an advance health care directive and a power of attorney for health care.

Update your plans regularly. One in six older Americans surveyed by Wells Fargo said their documents are out of date. Many, even the elderly, postpone these tasks because of a lack of urgency. Create a deadline for yourself and your family, for when you want to accomplish these tasks. Follow up when you receive prompts from your estate planning attorney and software (like Outlook) that says your plans need updating.

Talk about your wishes with your loved ones. About 72% of those surveyed by Wells Fargo indicated they believe their finances are a private matter. However, failing to discuss your money will make things harder for your family if you should suddenly—or even gradually, from dementia—be unable to manage your own financial affairs or make decisions. It's smart to start these conversations when you're in your 50s.

The simple truth is, putting an estate plan in place, having a will and updating both on a regular basis, will give you a surprising sense of peace. You’ll be more prepared, and your family will be better protected.

Reference: CNBC (May 10, 2018) “These costly estate planning mistakes can be fixed”

How Do You Plan for a Fulfilling Retirement?

Your golden years might be three decades long, so planning your retirement and income has to match up with a longer and more active lifestyle.

Today’s retirement could last two or three decades, as people stay healthier and live longer, according to a recent article from WTOP, “Are you ready for 8,000 days or more in retirement?”

Along with this good news come the issues and questions surrounding the transitions before and during retirement. As you near retirement, you may be pondering how you want to spend your days and if you’ll have the savings to live the life you want. Hopefully, if you have been planning, you have a good sense of your cash flow and assets available for retirement.

A complete financial plan addresses cash flow sources and a realistic living budget, as well as Social Security, Medicare, long term care, insurance, taxes and estate planning. It’s critical to envisioning your future retirement. Many professionals believe it’s important to incorporate both quantitative and qualitative planning to allow for a fulfilling retirement and a life well-lived.

At the MIT Age Lab, instead of looking at retirement as an end, they consider a new retirement story that lasts on average for 8,000 days. The MIT Age Lab divides a person’s life into four equal parts of 8,000 days. Each segment lasts approximately 22 years: Learning (birth through college); Growing (start of professional career, relationship/marriage, start young family from your 20s to mid-40s); Maturing (prime career years, bigger homes, raising older children from mid-40s to mid-60s); and Exploring (retirement beginning mid-60s).

In its studies, MIT found that most people only had a vague idea of what they would do in retirement.  It is remarkable that many see retirement as a single state. MIT found that without a clear vision, many retirees are unprepared for what comes next. While you may know exactly what you plan to do on Day 1 of retirement, do any of us really have a clear vision of Day 4,000? Initially in retirement, most have resources, good health and time for leisure activities, travel and social connections, along with the desire to pursue new interests.

Individuals and couples also begin addressing crucial “tactical” decisions that include where to live, how you will get around and with whom you will spend your time. That includes planning where and with whom to retire, as well as how much it will cost.

Meet regularly with your attorney to be certain your long-term plan is intact, can accommodate any changes and is in harmony with your estate plan.

Remember that retirement planning is not just about saving as much money as possible and figuring out the best way to manage the money through the stages of retirement. Planning for a loss of independence, including not being able to get around as easily or needing full time health care are also parts of retirement and aging that need to be addressed.

Reference: WTOP (May 9, 2018) “Are you ready for 8,000 days or more in retirement?”

Medicaid Work Requirements Being Reviewed in Michigan

Michigan is the fourth state to sponsor legislation that would require Medicaid recipients to work 29 hours a week to maintain their eligibility for Medicaid.

The Michigan House Appropriations Committee spent two hours reviewing Senate Bill 897, sponsored by State Senator Mike Shirkey, (Clarklake-R), but did not take a vote to advance the legislation. As reported in The Macomb Daily’s recent article, “Michigan lawmakers move toward work requirements for Medicaid recipients,” recipients would lose coverage for a year, if they fail to document their work activity, a provision that opponents say is the most stringent devised by any of the four states to date.

Healthy Michigan currently insures 695,820 people, according to the Michigan Department of Health and Human Services. It covers people earning up to 138% of the poverty level.

Opponents say the state’s attempts to impose work requirements will cost the state up to $30 million to administer. The bill would exempt the disabled and the elderly from work requirements.  However, opponents estimate that it could potentially impact health coverage for between 150,000 to 1 million people and increase uncompensated emergency room care.

According to a survey of Healthy Michigan enrollees by the Institute for Healthcare Policy and Innovation at the University of Michigan, 48.8% are working. Of that segment, 5.2% were students, 4.5% were homemakers, and 2.5% were retired.

Most Medicaid recipients who can work, are already working, opponents argue. A big issue is that those who are working are not allowed to work more than 25 hours because employers try to stay below 29 hours. That’s nearly 30 hours, which might require an employer to pay full benefits.

One estimate projects that 46% of Michigan Medicaid enrollees would be at risk of losing Medicaid coverage for at least one month during the year.

Many advocacy groups oppose the legislation, including the Elder Law & Disability Rights Section of the State Bar of Michigan and United Way for Southeastern Michigan.

Reference: The Macomb (MI) Daily (May 7, 2018) “Michigan lawmakers move toward work requirements for Medicaid recipients”