Capital District - NY Estate & Elder Law

Make Sure the Right People Have Access to Your Digital Accounts

 

 

The world is changing rapidly, thanks to fast-moving advances in technology, including the creation of digital assets. That means your estate plan may well need an update, according to Financial Advisor in “Unlocking Clients’ Digital Lives.”

As it turns out, if no one can access your digital assets, including accounts, many could be lost, stolen by a hacker or deleted.

Forty-one states and the U.S. Virgin Islands have passed laws that allow a financial planner or other fiduciary to access digital assets upon the death of a client, and four other states plus the District of Columbia are considering similar legislation.

In Missouri, the Fiduciary Access to Digital Assets Act allows a fiduciary to be granted access to a person’s electronic records or digital assets in a will, trust, power of attorney or another document.

The way we live our personal lives and the way we conduct our personal business and financial matters have changed, so we must address digital assets in our estate planning to reflect these changes.

Challenges are created if those digital assets are not addressed in the estate plan. Striking a balance between privacy rights and the need to settle an estate, can become an expensive and time-consuming issue. One family had to bring a lawsuit to access the emails of their son, a Marine who was killed while serving our country.

If you manage your bill paying and investments online, someone will need to be able to control bill payments, especially if they are on an autopayment schedule.

Start by preparing a complete inventory of all digital assets, including a description of each one and how it is accessed with names, passwords and security questions. Find out what each online platform requires, if a fiduciary or executor needs to access those accounts. Each platform, like each financial institution, has their own forms and procedures.

This information should be stored in a secure place. Some people prefer a password-protected digital location.

An estate planning attorney can help you create or update your estate plan that fits your unique circumstances and may include your digital assets.

Reference: Financial Advisor (Aug. 21, 2018) “Unlocking Clients’ Digital Lives”

 

Set Social Security Aside when Planning Retirement

There are many, many variables when determining Social Security benefits, so it is probably best to plan for your retirement and leave it as an unknown factor, according to The Motley Fool in “Want a Solid Financial Plan for Retirement? Take Social Security Out of the Equation.”

Let’s start with the variables. When will you file? If you wait until your full retirement age, that will be different than if circumstances force you to file earlier. Will your spouse file first? Who has the larger income? You’ll need to look at who files first and when. And then? You’ll still have some unknowns.

Does Social Security have an iffy future? Despite the rumors that are floating around, Social Security is not going bankrupt. The program’s primary funding source is payroll taxes, so as long as there is a workforce, there will be benefits.  However, there are more workers leaving the workforce now than there are entering it, so the program may soon need to tap trust funds to keep up with obligations in the face of insufficient revenue.

There may be reductions in benefits. They could be as much, say some experts, as 21%. That would be a big hit for any household’s income.

If you know your Social Security history, you’ll know that Social Security was never designed to be a general retirement source. It was to help the aging and destitute. The goal for Social Security today is to replace about 40% of the average worker’s pre-retirement income. Most seniors need double that amount to keep up with expenses, so relying solely on Social Security is a bad idea.

If you really want to have enough money to support yourself in retirement, don’t bank so heavily on Social Security. Instead, save aggressively to build a nest egg that’s secure enough, so you don’t have to worry about what the government has in store for the future.

If you are under 50 and working, you can contribute up to $18,500 per year to a 401(k) and $5,500 to an IRA. Over 50? Make the most of a catch-up contribution that elevates these limits to $24,500 to a 401(k) and $6,500 to an IRA.

Even if you can’t max out your annual contribution, just setting aside an amount every month will give you a better chance for a healthy nest egg and enjoyable retirement.

There’s nothing wrong with assuming you’ll have some income from Social Security. However, if you don’t base your retirement income on it, then your Social Security money can be a buffer against unexpected expenses or a little extra breathing room in your budget.

An estate planning attorney can advise you in creating an estate plan that fits your unique circumstances, including retirement planning.

Reference: The Motley Fool (Aug. 22, 2018) “Want a Solid Financial Plan for Retirement? Take Social Security Out of the Equation”

 

 

Retirees Can Continue Support for Charities

 

A recent study, which took a close look at American households and support for nonprofits, found differences in giving among genders as well as marital status, according to CBS News’ Moneywatch in “How to fund your charitable giving in retirement.”

The study from the Women’s Philanthropy Institute (WPI) determined that married couples and single women tend to maintain the same level of charitable giving after retirement. Single men reduce their giving, as they leave the workplace.

The report also found that single and married women are not confident about their financial health during retirement and both groups are concerned about not outliving their savings. Since women tend to live longer than men, it is not an unfounded fear.

Can retirees continue to be generous to nonprofits they care about, without putting their retirement funds at risk? The answer is yes, but it must be done mindfully.

First, don’t think of your retirement savings as a giant pot of potential donations.

Consider, instead, that your retirement savings are a portfolio that must generate regular income. An important part of your retirement portfolio should be the monthly “retirement paychecks” that need to last a lifetime. Your portfolio should be structured in such a way that the funds will generate income, regardless of the stock market’s performance. You can then supplement these paychecks with monthly or annual “retirement bonuses” that will also last for life but may fluctuate depending on market performance.

Once your portfolio and your deaccumulation plan is in place, then you can pay for charitable giving with money from either the paychecks or “bonuses,” depending on your situation. Plan for charitable giving, so that you are not digging a financial hole.

Another planning method: if you are 70½ or older, you can make a “qualified charitable distribution” directly from your traditional IRA. The distribution won’t be included in your taxable income and in effect is deducted from your taxable income. The distribution can also be used as your Required Minimum Distribution (RMD).

Qualified charitable distributions have some limitations. They are limited to $100,000 per year and they cannot come from Roth IRA or 401(k) plans. If you have large 401(k) plan and want to use some of that money for charitable giving, you’ll have to roll those over to an IRA platform that does allow funds to be donated to charity.

The WPI report also mentioned that single women and married couples are more likely than single men to volunteer their time in retirement. There is significant proof that volunteering at any age creates emotional and social benefits, while helping the community.

Planning for retirement should include an estate plan and a giving plan that includes giving your time as well as money. If you don’t already volunteer, now would be a good time to identify charitable groups that have meaning for you.

An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances and can include continuation of charitable contributions.

Reference: CBS News Moneywatch (Aug. 22, 2018) “How to fund your charitable giving in retirement”

 

 

Long-Term Care? The Discussion Should Not Be Avoided

 The older one gets, the more expensive the insurance becomes and that is, if it is still available.

The possibility of needing long-term care can be a thought that one would like to avoid. However, the truth is it should be discussed and taken into consideration in retirement planning, according to CNBC in “Plan ahead to protect your family and your fortune from this retirement risk.”

Consider this: in 2018, the national median annual cost of a semiprivate room in a nursing home was $85,775. A home health aide in 2017 cost $49,192. That’s not small change.

So how do you prepare for long-term care costs?

Start planning now. The earlier in your life that you purchase a long-term care insurance policy, the more likely you’ll be able to afford to buy one. As you get older, they get more expensive—if you can even purchase them at all.

Where would you want to receive care? If you have a choice, would you rather have someone come to the house for a few hours to help, or would you prefer to move to an assisted living facility? Both have costs.  However, figuring out which one you’d prefer (if you have a choice), will help in the planning process.

You can now purchase more than just the traditional long-term care program. There’s also a hybrid cash-value life insurance policy or you can self-insure, if you have the cash on hand.

Who will be making your medical decisions? Have your estate planning attorney put a healthcare directive in place—designating a trusted person who will make decisions about your medical care if you should become unable to do so.

Who will make your financial decisions? Your estate planning attorney will most likely also create a power of attorney for you. This must be someone who you trust, someone good with handling money and making decisions and who can take over paying bills and managing your household budget, if you can’t.

Both these people may never be called upon to act—but if they are, you and your family will be in much better shape. Make sure to discuss your choices for health care and finances with these individuals.

In some cases, particularly when it comes to the financial power of attorney, a bank or a professional advisor may be a good choice. They have certain reporting requirements and may be a less emotional choice than a family member.

An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances.

Reference: CNBC (Aug. 22, 2018) “Plan ahead to protect your family and your fortune from this retirement risk”

 

Want Help from Your Kids in Planning Retirement?

Your adult children may be interested in helping you create a retirement plan that works best for you and your family, according to Next Avenue in “How Your Adult Children Can Help You Plan for Retirement.”

Here are three ways your kids can help you.

Talk about your hopes and dreams for retirement.

You may have spent much of the last three or four decades listening to your kids express their wishes. However, now it’s time for you to share yours. Let your children know what you’d like to do and be as clear and specific as you can. The more they know, the more they may be able to help you.

For one family, the discussion centered on when the parents wanted to retire, where they wanted to live during retirement and how they envisioned spending their time. Questions like what would add value to your life, and what would take away from it, are good starting points. Would you choose to live in the same area as your adult children, so you could be part of their lives and their children’s lives?

The topic of grandchildren is a frequent discussion. Do you want to be a regular part of their day-to-day activities or are a few visits a year for holidays enough for you?

Can your adult children be part of your plans?

Many retirees chose to make being of service to others a large part of their retirement. Having your adult kids or grandchildren involved in the same organization as you, albeit on a different level, might make everyone’s life more fulfilling.

Communication with adult children is sometimes a challenge. Remember that you have to keep up your part of the dialogue. If your kids are more comfortable with texts than with long phone calls, be flexible.

Have the real talk about estate planning and caregiving.

Allowing your grown children to be involved with estate planning and discussing caregiving plans for later in life can allay a lot of general fears about aging and eventually, death. It’s not the most fun conversation you’ll ever have. However, having these conversations now, will make your later years more comfortable and less stressful for all.

Where do you want to live if you can’t live on your own? Do you want your children to take care of you or would you rather be in a care facility?

An estate planning attorney can advise you in creating an estate plan that fits your unique circumstances.

Reference: Next Avenue (Aug. 21, 2018) “How Your Adult Children Can Help You Plan for Retirement”

 

 

Trust May Be Amendable but Needs to Be Done with Care

 

 

Most trusts are amendable. However, it is a good idea to make sure before you begin the move, according to The Times in “Estate Planning: Who can amend a trust?” Once you know that it is amendable, you’ll need to verify exactly who can amend it. The most logical person to do this would be the Settlors.

If the parents, who would typically be the Settlors, lack the capacity to amend the trust, things can get complicated. You’ll need to determine whether they are able to do this. If they are overwhelmed by the reasons for the change and don’t understand it, you can try to simplify it or work with a social worker who might be able to frame it in a way they can understand. However, if they can’t understand because they don’t have the mental facilities to execute an amendment, you’ll need to take certain steps to make sure any changes to a trust are done properly.

Let’s assume these parents lack the mental capacity to execute an amendment. The next step is to locate an Attorney-in-Fact (AIF), who is appointed under the terms of the Power of Attorney (POA).

There are POAs that grant the authority to an AIF to address estate issues and documents, including a living trust. If the authority is there, you must address a few additional matters.

First, does the trust allow an AIF to amend it? You’ll need to examine the provisions in the trust, to see if there are any limitations about who can make amendments. It’s possible the AIF may be permitted to do this.  However, it could go either way, depending on how the trust was prepared.

Here’s another sticking point: does the AIF have “self-dealing” issues? That means whether or not the AIF is contemplating any actions that may benefit them. If the amendment to the trust could benefit the AIF, they may not be able to make the change.

If all else fails, the successor trustee may be able to docket the trust with the court and ask it to issue an order that would allow the trustee to deviate from the terms or amend the trust.

The court order will take time and money. However, it protects the person making the amendment by making it very clear that they requested and were granted the necessary permission from the court. This can be very important,  if anyone questions the change to the trust.

An estate planning attorney can advise you in creating an estate plan that fits your unique circumstances and may include an amendment to a trust.

Resource: The Times (Aug. 19, 2018) “Estate Planning: Who can amend a trust?”

 

Baby Boomers Need Updating on Estate Planning

 

It was determined recently that more than half of the Baby Boomers in America do not have an estate plan and should know more about estate planning, according to Country Living in “Everything Baby Boomers Need to Know About Estate Planning.”

The first and most fundamental fact: everyone needs an estate plan. Whether you are wealthy or just getting by, older or a young parent, you need to have an estate plan.

Estate planning doesn’t have to be scary or complicated. Many people feel that creating a will and other related documents will be overwhelming.  However, it doesn’t have to be. An experienced estate planning attorney will help by teaching you what your particular situation requires. It won’t take as long as you think. The time and expense you save your heirs, make having a professional do this for you well worth the money spent.

You can make a difference with your estate plan. Many people use their estate plans to give to a charity or cause, that is important to them. Many use a charitable gift in their will, known as a “bequest,” to leave money behind—often the biggest donation they make. It’s a way to build a legacy and know that you’ve contributed to making the world—or a small corner of it—a better place.

If your family includes minor children, you need a will that names a legal guardian, if something should happen and you and their other parent are no longer able to care for them. You don’t want someone else making this decision. You can also appoint someone who will be in charge of the finances for your children.

If you have “furry kids,” aka pets, you can also choose a guardian for them. Many pets end up in animal shelters, because no one in the family can take care of them and no provisions have been made for their care. You can also establish a pet trust so money for their care is provided.

Do it early and often. Creating your will is just the first step. They need to be updated, as your circumstances and laws change. Many people update wills after a trigger event such as marriage, birth, death or divorce. But laws and assets change, and your will needs to be updated, especially after major tax law changes.

The will is just the beginning of an estate plan. There are several basic documents that will protect you while you are alive and after you have passed. They include the durable financial power of attorney, which determines who can make financial decisions on your behalf, if you are ill and cannot do so.

You also want an advance healthcare directive, which includes a healthcare power of attorney. That’s a person who can make healthcare decisions on your behalf, should you be unable. You also want to have a living will, to explain what you want with regard to staying alive through artificial means.

Finally, accounts where you have named a beneficiary, should be reviewed every now and then. The beneficiary designations appear in accounts like IRAs, 401(k)s, bank and investment accounts, to name a few. The designation supersedes anything in your will, so make sure you know what these are and update them as life changes.

An estate planning attorney can advise you, in creating an estate plan that fits your unique circumstances, Baby Boomer or not.

Reference: Country Living (Aug. 17, 2018) “Everything Baby Boomers Need to Know About Estate Planning”

 

 

Long Life? Expect Some Challenges along the Way

 

The life expectancy for Americans is getting longer and longer, with the concept that the longer you live the more likely you’ll have an even longer life span, according to Kiplinger, in “Are You Ready for Longevity? 4 Steps to Take Now.” 

Given the happy fact that you should expect to live a long time, what can you do to protect yourself and your family? Here are four steps:

Have a plan for long-term plan. For a married couple, it’s likely that one of the two will end up in a nursing home. Plan for how you’ll manage to pay for that, long before you’ll need it. If you can purchase a long-term care insurance policy, while you are still healthy enough to qualify, you won’t need to use up all the household’s money to pay for the care. Long-term care insurance usually pays for both skilled nursing home care and in-home health care aides.

Traditional long-term care policies can be expensive. However, insurance companies have created hybrid policies that combine long-term care benefits with life insurance. If you don’t use the long-term benefits, your loved ones receive the life insurance proceeds upon your death. That takes a way the worry that you will pay premiums and get nothing back.

Plan for incapacity. You’ll need to have a medical advance directive, including a health care proxy and health care powers of attorney, so you can name another person to make your decisions when you are no longer able to do so. Do not assume that because you are married, your spouse will be legally able to make those decisions.

If you become incompetent and don’t have a medical advance directive in place, your family will need to go to court to get legal authority to make those decisions. This is a guardianship proceeding, which is expensive, time-consuming and stressful.

The same holds true for financial decisions. You’ll want a power of attorney, so someone else can sign on your behalf and access your accounts. This should be a trusted individual who will look out for you and your family.

If you die and assets are solely in your name, your family will need to go to court before they can access any of your assets. This is a process known as probate. If you have an estate plan in place, your plan should include having some accounts that are POD or Payable on Death, so your loved ones are not left without assets. Your estate planning attorney will recommend the right planning tools, so that your family is protected.

Finally, do your tax planning as part of your estate plan. You likely won’t be paying federal estate tax.  However, there is a good chance that your state has an estate tax or an inheritance tax.

Reference: Kiplinger (August 13, 2018) “Are You Ready for Longevity? 4 Steps to Take Now”

 

Roth IRA Conversion Is Popular but Not for Everyone

 

Americans have moved more than $75 million, since Congress approved the partial or full IRA conversion to a Roth IRA.  However, while it is popular, it doesn’t always work out for the best, according to The Wall Street Journal in “When to Ignore the Crowd and Shun a Roth IRA.”

Retirement funds that go into a Roth get tax-free growth and tax-free withdrawals, minus any required payouts based on age, which is a sticking point for IRA owners.

A traditional IRA grows tax free, but withdrawals are taxed as ordinary income. Those pesky Required Minimum Distributions (RMDs) are also a permanent fixture, even if you don’t need the money.

However, Roth conversions come at a cost. You’ll have to pay a tax to transfer your money from the traditional IRA to the Roth and you may lose valuable tax deferral, without gaining more valuable tax-free benefits.

This is a deadline to bear in mind: after tax year 2018, you won’t be allowed to undo a Roth conversion.

What are some further reasons to take a pass on the IRA Roth conversion train?

Your tax rate is probably going down. If your tax rate is going to be lower when you take withdrawals, the transfer will cost more. If you are going to convert, do so in a low tax-rate year when income takes a dive. For instance, if you are in your 20s and have an IRA and return to school, or if you’ve retired but aren’t yet taking IRA RMDs.

The same goes for someone who is about to move to a state where taxes are lower.

Where is the money coming from to pay the tax bill for the conversion? If you don’t have the money to pay the tax bill and plan on using money from the IRA to pay it, you’re using assets that could otherwise grow tax free.

Converting to an IRA raises your income level for that year. Therefore, benefits that exist at a lower income tax level might lose value as your income takes a leap. Tax breaks for college or other deductions could be lost.

If you make frequent donations to charity, you can use your traditional IRA’s RMD to donate to charity. The donation can count toward your required payout, up to $100,000 per year from your IRA. You can’t do that with a Roth.

An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances and may include a Roth IRA conversion.

Reference: The Wall Street Journal (Aug. 17, 2018) “When to Ignore the Crowd and Shun a Roth IRA”

 

 

Can You Customize Your Own Homecare?

 

There are many seniors and retired Americans that are not aware of options that help them remain in their own homes if that is what they prefer, according to Next Avenue in “Does Self-Directed Long-Term Home Care Make Sense for You?  

When one woman sought long-term care for her 83-year-old father, she knew the options because she was a long-term care researcher for AARP’s Public Policy Institute. She’s been examining how older Americans can “self-direct” their own care, choosing from several options they can receive in their own homes.

Several states now provide innovative strategies to provide long-term care at home. They involve “person-centered” choices to Medicaid patients. Each state has these programs, although they vary in quality and scope.

One Texas woman had relied on home health care agencies.  However, found them inflexible and unreliable. She switched to her state’s self-directed program and found that by scheduling and paying her home-care providers as she wished, the services were provided to her liking.

A study by Matematica Policy Research found that people who were able to take charge of their care were more satisfied and experienced equally good or better outcomes. The idea of choosing your own mode of long-term care is an evolving trend. There are now more than one million people in more than 200 self-directed Medicaid and Veteran directed programs nationwide. Enrollment in these services has increased by more than 40% since 2011.

Self-directed programs are not for everyone, because they require the ability to manage the care and vet caregivers. Someone who is too ill or suffering from mental incapacity may not be able to handle this.

You’ll need to know what services are available locally before making a choice. For example, when is adult day care an option? How do you find a home care specialist who can do anything from basic homemaking to providing in-home nursing care?

The other drawback is that self-directed services are typically offered only through veterans and state Medicaid programs for low-income participants.

Most Americans who need long-term services must still pay for it themselves. You’ll need a family member with the tenacity and time, or you can hire a geriatric care manager who will be able to determine needs and set up a care management plan. That person can help select the right professionals and coordinate services.

Reference: Next Avenue (Aug. 13, 2018) “Does Self-Directed Long-Term Home Care Make Sense for You?”