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”

 

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”

 

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?”

 

 

Generation X Is Facing Some Tough Retirement Challenges

 

Members of Generation X, who are still feeling the impact of the Great Recession, are facing some real challenges in saving for their retirement, according to TheBalance.com in “Retirement Milestones to Hit for the Gen X Years.”

According to a 2018 survey from AmeriTrade, 43% of Gen Xers say they’re behind on retirement savings and a just 33% of people 39 to 53 years old are confident about being financially secure when they retire.  That generation is also feeling the double-crunch of paying off their own college loans, while trying to save for their own children’s college education.

Getting past these obstacles is possible, as is getting retirement savings on track. However, you’ll need a plan.

Among the milestones to aim for, if you’re a Gen Xer:

Set a Target. You’ll want to know what you are aiming for in retirement and that means knowing about how much money you’ll need to accumulate. Consider what kind of a lifestyle you’ll want. Does retirement look like a lot of luxury travel or are you open to the idea of seeing the world from an Elder Hostel? What kind of housing will you want to live in and what kind of car will you want to drive? Will your children be self-supporting by the time you retire, or will you be first sending them off to college? All these questions will be important to figuring out what kind of a nest egg you’ll need.

Does Your Employer Offer a 401(k) Plan? This could be your greatest tool for retirement savings. You can save for retirement on a tax-deferred basis, while you are entering your peak earning years. If you’re really lucky, you work for a company that matches contributions, so your retirement savings will grow even faster.

If you haven’t already started using this employee benefit, start now. Are you saving enough to qualify for the full employer match?  You should do what you can to bring your savings level up to that point. If you are already getting the match, can you increase your own contribution?

If you can’t make an adjustment now, consider making a small increase to your savings, like 1% to 2% every year. If the gradual increase grows along with your paychecks, you won’t notice the difference.

Look into Other Tax Advantaged Accounts. As you move into your late 30s and early 40s, your earnings are most likely growing, so you need to look past your employers’ plans. Consider a traditional IRA (Individual Retirement Account) or a Roth, depending on your income level. If you qualify for a Roth IRA, the money is 100% tax-free when you withdraw it. The traditional IRA is taxable in retirement. However, you have the benefit of a tax deduction on your contributions.

Don’t Overlook the Health Savings Account. The HSA is not a retirement account.  However, it can be useful in funding retirement costs. HSAs are designed to be used to save for qualified medical expenses. Contributions to these accounts are tax-free, if they are used for health care but you can also tap into one of these accounts for other reasons. Withdrawals from an HSA are penalty-free after age 65.  However, you will have to pay regular income tax on the money. If your employer offers a matching contribution to an HSA, there’s no reason not to fully fund one of these accounts.

An estate planning attorney can advise you in creating an estate plan that fits your unique circumstances and can help meet the challenges of your generation.

Resource: TheBalance.com (June 4, 2018) “Retirement Milestones to Hit for the Gen X Years”

 

Have Young Children? Estate Plan Is a Priority

 

 

 

Many young families with small children do not have estate planning at the top of their list. However, it really should be a top priority, according to The Daily Sentinel’s in “What is missing from your estate plan?”

Some information in estate planning that should be known is a last will and testament. It is the document which parents need to legally nominate guardians to rear their children, if orphaned. While some people name one person to rear the children and handle the money, it’s a good idea to separate the two roles.

Without these instructions in a will, those left behind can have very different ideas about where the children should live and who should care for them. If the two parent’s families have very strong opinions, suddenly both families have hard choices to make about what will happen to the children.

No parent wants to leave a legacy of court battles and family division.  However, that’s what is likely to happen without a will.

There are other issues that estate plans address while you are alive.  It is also necessary to plan for incapacity. A living will, also known as an “advance directive,” is important because it helps pre-answer questions, regarding what treatment and care you would want if unable to speak for yourself. Do you want to be kept alive by artificial means? You do not want your loved ones making this decision during a time of great emotional stress, so this is an important document to have in your estate plan.

Finally, your estate plan should include a medical durable power of attorney to deal with all other medical decisions other than end of life. Without it, if you are not near death but not able to share your opinions about your care, your family and your medical providers are placed in a difficult position. In contrast, those who care enough about their family designate an agent and ensure that their wishes are made legally binding.

The big question everyone must face is “When should I start working on my estate plan?” If the answer is “Later,” then the real answer is “No time soon.” For young parents, that puts your minor children in a bad position, where a court may make the decision about who will rear them and how their lives will go on after you are gone.

An estate planning attorney can advise you in creating an estate plan that fits your unique circumstances, including families with young children.

Resource: The Daily Sentinel (Aug. 12, 2018) “What is missing from your estate plan?”

 

 

Children Can Contest Glen Campbell’s Will

 

Three of Glen Campbell’s children, who were intentionally left out of his will, have been given the right to contest the will by a judge, according to Wealth Management.com in “Glen Campbell’s Kids Come After the Rhinestone Cowboy’s Estate.”

Campbell, who recently passed away, left two wills from 2001 and 2006. The 2006 will names Campbell’s fourth wife Kimberly, who is the executor of the estate, and five of Campbell’s other children as his beneficiaries. Campbell went public with his Alzheimer’s diagnosis in 2011.  However, it’s not known how far back his illness began. The legal burden facing his children: prove that he lacked the needed capacity to execute both wills.

If the will is deemed invalid because of lack of capacity or undue influence, the immediately preceding will is resurrected, said one estate planning attorney who is not affiliated with the case. The previous will probably disinherited them also, which is why they must prove the invalidity of both wills.

Kimberly has told a local newspaper that she would not challenge the kid’s right to contest the wills and the judge’s decision noted the lack of opposition. She has also filed a claim seeking reimbursement from the estate for more than $500,000 to cover the cost of his medical care.

It was also reported that one of his daughters, Debbie Campbell-Cloyd, has filed for a complete accounting of all payments made by the estate, as well as payments to and from a previously undisclosed bank account. She alleges that royalties that should have been deposited into an account controlled by Campbell’s estate, were instead deposited into this account, which is now controlled by Kimberly. The singer’s former manager has power of attorney over the account.

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

Resource: Wealth Management.com (Aug. 2, 2018) “Glen Campbell’s Kids Come After the Rhinestone Cowboy’s Estate”

 

 

Your First RMD May Be Looming

 

You have been fortunate over the years to grow your IRA tax free.  However, withdrawals from your traditional IRA is taxable income. You will have to make Required Minimum Distributions starting at age 70½. It is a good idea to be prepared financially, according to Kiplinger in “When Do I Have to Take My First RMD?”

If you miss that deadline, be warned: penalties are expensive. How does half of your required withdrawal amount sound? It is bad enough to be sure you won’t miss this deadline!

It’s not as hard today to find out when you must take your RMD, although in the past this was challenging. There are online calculators that can help, and you can always ask your estate planning attorney, just to be sure. The IRS gives you a little wiggle room for that first RMD–until April 1 of the year that you reach age 70½. However, here’s the kicker: the second RMD is due on December 31 of that same year. Therefore, you might end up taking two RMDs in one tax year, which could make your tax bill bigger than you had expected. You may be tempted to defer taking the first RMD, but don’t. Take it by the first calendar year in which you turn 70½ and avoid that double-RMD whammy.

There are a few factors that could change your RMD. One of them—if your spouse is more than 10 years younger than you are and is named as the sole beneficiary on at least one of your IRAs—the RMD will be less than what some online calculators show.

If you discover that you missed your RMD, don’t delay trying to fix the error. Figure out how much you should have taken and remove that amount as soon as possible from the IRA.

File Tax Form 5329, “Additional Taxes on Qualified Plans (Including IRAs) and Other Tax Favored Accounts.” You can file this with your tax return or by itself.  If you are requesting that the 50% penalty be waived, payment does not have to be made when the forms are filed.

Last, attach a letter explaining what happened steps you’re taking to fix the error.

If you’re still working, you can delay taking RMDs from your current employer’s 401(k) until after you stop working in that job, unless you own 5% or more of the company. The important word here: current employer. You’ll have to take RMDs from prior employers, even if you’re still working. However, you might be able to delay your RMD, if your current employer lets you roll over money from other retirement accounts into the current employer’s plan.

After you’ve taken your first RMD, subsequent years get a little easier. They’re due by December 31.

An estate planning attorney can advise you in creating an estate plan that fits your unique circumstances and can also make sure that your retirement and estate plans work well together.

Resource: Kiplinger (July, 2018) “When Do I Have to Take My First RMD?”