Thoughtful Retirement Planning Leaves Wives More Financially Stable

Thoughtful Retirement Planning Leaves Wives More Financially Stable:  Statistics show that typically, wives outlive their husbands by up to a decade.  Sadly, the incidence of poverty for women older than 65 is over 12 percent, considerably more than for men within the same age group.

The key reason is that most of the couples’ financial resources will likely be spent during the last few years of the husband’s life on healthcare costs as well as long-term care.

What do you do?  Here are some ideas:

Ascertain how much you will need to save for retirement in order to produce a dependable life-long income.

The person who has the larger salary history (generally the husband) will be able to maximize their Social Security benefits by not taking them until age 70 or beyond.

Plan for your 401(k) accounts and retirement savings to last until both of you are gone.

Have a good system for dealing with long-term health care expenses.

If one of you has a considerable benefit from a pension plan and you have a choice to elect a joint and survivor annuity, take it — the majority of retired people outlive a lump sum payment.

Attempt to keep in top shape through employing healthy and balanced habits.

Make an effort to retire without having lots of debt – specifically, try to pay off your mortgage loan prior to retirement.

The Dorcey Law Firm, PLC is an Estate Planning, Asset Protection and Business Planning law firm with offices in Fort Myers, Florida and Naples, Florida. Our firm is dedicated to its clients, the rule of law and the betterment of the Southwest Florida community.

It is our drive to provide our clients with the highest level of legal services in the areas of Last Will and Testaments, Living Trust, Irrevocable Trusts, Estate Planning, Asset Protection, and complete Business Planning. If you or someone you know needs assistance with Florida retirement planning, please contact us today to schedule your free consultation.

Making Sure Your Aging Parent has the Correct Estate Plan in Place

It’s a delicate discussion, but when parents are aging, their children should find out if their parents have several basic estate planning documents in place and talk about their final wishes. If they have not done any planning, now is the time—before a crisis occurs.  Here at The Dorcey Law Firm, our goal is to transform families for generations to come; something we can only do through proper proactive planning.

The Monterey Herald’s recent article, “Financial planning: Making sure Mom is taken care of,” says to first make sure that they have their basic estate planning documents – a will or trust, power of attorney, and advanced healthcare directives – in place. It is important to be sure these documents fully reflect your parent’s desires. An advanced healthcare directive lets them name a person to make health care decisions on their behalf, while a power of attorney allows a named person to make financial decisions.

Based on the way in which the forms are written, the agent or surrogate can have broad authority, including the ability to access bank accounts, consent to or refuse medical treatment, or to leave instructions for health care.  Big decision, such as whether or not to be resuscitated or have life prolonged artificially, can also be put in writing, thus removing this tough choice from a child or other loved one. To limit these instructions in any specific way, it is important to talk with an experienced attorney, and have these wishes in writing.

Another key document to have is a last will & testament or living trust.  When determining if a trust is advisable, there are many factors to consider, particularly when the goal is to avoid probate after passing away.  These factors include the type of assets, and whether they are held jointly or allow for beneficiary designations; the beneficiaries ages and financial stability; whether planning for future divorce or creditor is a concern; and many more. You should conduct a full inventory of your parent’s accounts, including where they are held and how they are titled, as well as gathering the named beneficiaries on all accounts and policies.

It is also important not to make any major changes without consulting your attorney first.  For example, if your parent has a brokerage account with low-cost basis investment, you will not want to change this to a joint ownership account. The step-up in cost basis that assets receive at the time of death makes it better for the account to remain in their individual name. While you may gain control of the asset doing that (something that can also be accomplished through the power of attorney), you will lose the step up in basis.  A beneficiary designation may suffice.

To inquire more on how our law firm helps families plan for their long-term care needs, whether years in advance or after a health care crisis has occurred, please contact our office for a free consultation at (239) 418-0169.

5 Things to Know to Reduce Tax on Capital Gains

Although it is often said that nothing is certain except death and taxes, the one tax you may be able to avoid or minimize most through planning is the tax on capital gains. Here’s what you need to know to do such planning:

What is capital gain?  Capital gain is the difference between the “basis” in property (usually the purchase price of property) and its selling price. So, if you purchased a house for $250,000 and sold it for $450,000 you would have $200,000 of gain ($450,000 – $250,000 = $200,000). However, the basis can be adjusted if you spend money on capital improvements. For instance, if after buying your house you spent $50,000 updating the kitchen, the basis would now be $300,000 and the gain on its sale for $450,000 would be $150,000 ($450,000 – ($250,000 + $50,000) = $150,000). Just make sure you keep good records of any capital improvements in order to prove them in the event of an audit.

Exceptions to the tax?  First, if you owned the property for less than a year, you would be subject to short-term capital gains tax rates, which are essentially the same rates as income tax. Second, if your taxable income, including the capital gains, is $38,600 or less for a single person and $77,200 for a married couple (in 2018), there’s no federal tax on capital gain. But beware that the capital gains will be included in the calculation and could put you over the threshold. Third, if your income is more than $425,800 for a single person and $479,000 for a married couple (in 2018), the federal capital gains tax rate is 20 percent, bringing the combined federal and assumed state rate up to just over 25 percent.

Personal Residence Exclusion. You may exclude up to $250,000 for an individual, or $500,000 for a married couple, of gain on the sale of your personal residence. To qualify, you (or your spouse) must have lived in and owned the house for at least two out of the five years prior to the sale. If you are a nursing home resident, the two-year requirement is reduced to one year.

Carry-Over v. Step-Up in Basis. If you give property to someone else, they receive it with your basis. So, if your parents give you a vacation home they bought for $25,000 and now its fair market value is $500,000, your basis will also be $25,000.  If you sell it, your gain is $475,000. On the other hand, the basis in inherited property gets adjusted to the value on the date of death. If your parents passed the vacation home on to you at death rather than giving it to you during life, the basis would be adjusted to $500,000, potentially saving you hundreds of thousands on its sale. Similar types of savings can be realized with the appropriate use of trusts.

To inquire into saving on capital gains taxes, ensuring as much of your legacy gets passed on as possible, please contact our office for a free consultation at (239) 418-0169.

 

New free service alerts property owners from potential property fraud

New free service alerts property owners from potential property fraud

FORT MYERS, FLA (Aug. 19 2019) – Lee County property owners can now sign up for a new free service to alert themselves of potential property fraud, Clerk Linda Doggett announced today.

Property Fraud Alert emails notifications to subscribers within 48-hours whenever a lien, deed, mortgage or other land record with their registered name on it has been recorded into the Clerk’s Official Records. This notification does not apply to documents filed in court proceedings.

According to the FBI, property and mortgage fraud is one of the fastest growing white-collar crimes. Scammers file fraudulent deeds, making it appear as if they own the property. This type of fraud can go undetected if the property owner does not periodically check the Official Records. Although checking does not prevent the actual fraudulent activity from occurring, it does provide an early warning of what may have otherwise gone undetected.

“We invest in insurance and security systems to protect valuables inside our houses, but we often forget about our actual homes and property,” Doggett said.

All property owners in Lee County are encouraged to sign up and begin protecting their property. To subscribe or learn more, visit LeeClerk.org/propertyfraud.

After registering and confirming your email address, any time a document is recorded in Lee County that matches the name that you registered, you will be alerted by email. A link is provided in the email to easily view the recorded document.

If you register with a common name, you may receive an alert for a legitimate record that pertains to another individual with the same name.

“Reviewing your property records is an important way to protect you from fraud. I encourage you to sign up today and take advantage of this free service” Doggett said.

Anybody who believes they have been the victim of property fraud should contact the Lee County Sheriff’s Office at 239-477-1000.

https://www.leeclerk.org/about-us/spotlight

Family Caregivers and Home Care

Caring for an ailing family member is difficult work, but it doesn’t necessarily have to be unpaid work.  Traditionally, Medicaid has paid for long-term care in a nursing home, but because most individuals would rather be cared for at home and home care is cheaper, all 50 states now have Medicaid programs that offer at least some home care. In some states, even family members can get paid for providing care at home.  The programs vary by state, and also include some non-Medicaid-related programs.

Medicaid’s program began as “cash and counseling,” but is now often called “self-directed,” “consumer-directed,” or “participant-directed” care.  The first step is to apply for Medicaid through a home-based Medicaid program.  Medicaid is available only to low-income seniors, and each state has different eligibility requirements.  Medicaid application approval can take months, and there also may be a waiting list to receive benefits under the program.

The state Medicaid agency usually conducts an assessment to determine the recipient’s care needs—e.g., how much help the Medicaid recipient needs with activities of daily living such as bathing, dressing, eating, and moving.  Once the assessment is complete, the state draws up a budget, and the recipient can use the allotted funds to pay for goods or services related to care, including paying a caregiver.  Each state offers different benefits coverage.  Some services that Medicaid may pay for include the following:

  • In-home health care
  • Personal care services, such as help bathing, eating, and moving
  • Home care services, including help with household chores like shopping or laundry
  • Caregiver support
  • Minor modifications to the home to make it accessible
  • Medical equipment

The Medicaid applicant must apply for Medicaid and select a program that allows the recipient to choose his or her own caregiver, often called “consumer directed care.”  Recipients can choose to pay a family member as a caregiver, but states vary on which family members are allowed.  For example, most states prevent caregivers from hiring a spouse, and some states do not allow recipients to hire a caregiver who lives with them.  Most programs allow ex-spouses, in-laws, children, and grandchildren to serve as paid caregivers, but states typically require that family caregivers be paid less than the market rate in order to prevent fraud.

In addition to Medicaid programs, some states have non-Medicaid programs that also allow for self-directed care. These programs may have different eligibility requirements than Medicaid and are different in each state. Family caregivers can also be paid using a “caregiver contract,” increasingly used as part of Medicaid planning.

To inquire more on how to utilize family caregivers for long-term care needs, whether for yourself or for an aging parent or relative, please contact our office for a free consultation at (239) 418-0169.

If I pass, I have Provided for my Spouse – Or have I?

Do you have an Estate Plan that has the ability to transform your family for generations to come?  One that is thoughtful, and ensures your final wishes will be fully carried out?  Many think they do; yet I invite you to read the following true story of an unfortunate situation that happens all too often after the sudden passing of a spouse.

This client, we will call him Dr. Harris, was married to his second wife.  He assured his wife that she would be fully taken care of if anything ever happened to him.  He had his estate plan done through a well-known attorney in town, where he provided fully for his wife to ensure she would have more than enough to continue her lifestyle after his passing.  So where is the problem, you ask?  It lies with the way his estate plan was funded.  Unfortunately, this well-known attorney did not assist the client in putting his assets in the trust.  This becomes an issue because those assets (bank accounts, retirement funds, life insurance, etc.) had his children listed as beneficiaries.  This means those assets would pass directly to his children, and not through the trust.  I.e., his spouse, whom he loved dearly, would receive nothing.

Unfortunately, when Dr. Harris died unexpectedly one year after creating his Estate Plan, this was exactly the result.  Mrs. Harris assumed that everything was handled, and now had to learn that she did not have enough to pay for her home, expenses, or daily activities.  Her husband had promised her that she would be taken care of, but in fact did not have enough in the Trust to fulfill his gift.  This was certainly not his intent for his wife, and her only choice was to then sue her husband’s children from his first marriage, to receive the funds she needed to pay for her living expenses.  This dispute lasted over 2 ½ years in the Probate court before being settled.

During this process, there were 5 different attorneys hired to represent different family members.  At mediation one morning, while they were enjoying their coffee, one of them remarked with a smile “Isn’t this great?  Five attorneys all billing by the hour because this family can’t get along.”  This is a common mistake that we see; if you have a second marriage please do not let this example of poor planning become your family.

The moral of the story is this: no matter how great a reputation an attorney may have in the drafting of the documents, selecting an attorney who gives you more than a stack of papers is what matters.  This is why working with an attorney who is a process-driven office that includes a follow-up plan and ensures that your assets have been fully funded to your Estate Plan is so important.  Let your attorney assist you in funding your Estate Plan for you, so you can worry about truly providing for your spouse while you are still here.

Our firms offers a free consultation, which includes a 50-point complex review and funding analysis to evaluate your current Estate Plan.  To inquire more on your personal Estate Plan or how to properly provide for your spouse, please contact our office for a free consultation at (239) 418-0169 or visit www.DorceyLaw.com.

10 Documents you should have as an Adult

Fifty is a little on the late side to start taking care of these important life matters. However, it is better late than never. It’s easy to put these tasks off, since the busyness of our day-to-day lives gives us a good reason to procrastinate on the larger issues, like death and our own mortality. However, according to Charlotte Five’s article “For ultimate adulting status, have these 10 documents by the time you’re 35,” the time to act is now.

Here are the ten documents you need to get locked down.

A Will. The last will and testament does not have to be complicated. However, it does need to be prepared properly, so that it will be valid. If your family includes minor children, you need to name a guardian. Pick an executor who will be in charge when you pass. If you don’t have a will, the law of your state will determine how your assets are distributed, and a court will name a guardian for your children. It is better to have a will and put your wishes down in writing.

Life insurance. There are two basic kinds: term insurance, which covers about twenty years, and universal or whole, which covers you for your lifetime. It is customarily advised that you have enough to cover your liabilities: your home mortgage, college funding for your kids and any outstanding debts, like credit cards or a car loan. This way, you aren’t saddling heirs with your debt.

Durable power of attorney. This document lets you designate someone to pay your bills, manage your money and make financial decisions for you, if you become incapacitated. Without it, your relatives will need to go to court to be appointed power of attorney. Pick a trusted person and have the form done, when you meet with your estate planning attorney.

Savings. Most Americans don’t do this. However, if you start saving, no matter how small an amount, you’ll be glad you did. You need savings to avoid creating debt, if an emergency occurs. It is customarily advised that a cash cushion of six months’ worth of monthly expenses in a savings account will give you peace of mind.

Insurance coverage. Make sure that you have the right insurance in place, in addition to life insurance. That means health insurance, auto insurance and disability insurance.

Credit report. People with better credit reports get better rates on home and auto loans. You can get them free from the big credit reporting services. Make sure everything is correct, from your address to your account history.

A letter of instruction. Where do you keep your estate planning documents? What about your bank statements, taxes and insurance documents? What about your digital assets? Keep a list for easy access for those who might have to figure out your affairs.

Retirement plan. Most people only know they don’t have enough saved for retirement. That’s not good enough. If you aren’t enrolled in your company’s 401(k) or other retirement savings plan, get on that right away. If your company matches contributions, make sure you are saving enough to get every bit of those matching dollars. If your company doesn’t have a retirement plan, then open an IRA or a Roth IRA on your own. You should try to contribute as much as you feel comfortable with or feel is necessary.  It is recommended that you enlist the services of a Financial Advisor to determine the appropriate amount of your contributions.

Updated resume. It also helps to do the same thing with your LinkedIn profile. No matter how long you’ve been in your field, everyone looks at your LinkedIn profile to see who you are and what and who you know. Make sure you have an updated resume, so you can easily send it out, whether it’s a casual conversation about a speaking opportunity or if you’re starting to look for a new position.

A budget. Here’s how you know you’re really an adult. Budgets went out of fashion for a while, but now they are bigger than avocado toast. If you don’t know what’s coming in and what’s going out, you can’t possibly have any kind of control or direction over your financial life. Start tracking your expenses, matching with your income and making any necessary changes.

One last thing—do you have a bucket list? Don’t wait until you’re 70 to consider all the places you’d like to go or the people you’d like to meet. It’s true–you only live once, and we should enjoy the ride.

Reference: Charlotte Five (April 23, 2019) “For ultimate adulting status, have these 10 documents by the time you’re 35”

 

Avoiding a Family Feud When Choosing a Power of Attorney
family upset over power of attorney decisions

Avoiding a Family Feud When Choosing a Power of Attorney

The challenge in tasking a family member or trusted friend is not just making sure they have the necessary skills, but to navigate family dynamics so that no fights occur says Considerable.com in the article “How to assign power of attorney without sparking a family feud. Every family situation is different, but in almost all cases, transparency is the best bet.

Start by understanding exactly what is meant by power of attorney, how it functions within the estate plan, and how siblings can all be involved to some degree with the family’s decision-making process.

Power of attorney is a term that gives an individual, or sometimes, individuals, the legal authority to act on behalf of someone else. It is usually used when a person, usually a parent or a spouse, is unable to make decisions for themselves because of illness or injury. It must be noted that power of attorney generally relates to financial and legal decisions. There are methods to address making decisions for another person for their health care or end-of-life decisions, but they are not accomplished by the power of attorney (POA).

It should be noted that there is a distinct difference between power of attorney and executor of the estate. Power of attorney is in effect while the person who has granted the authority is alive.  The executor of the estate assumes responsibility for managing the estate through the probate process. While they are two different roles, they can be held by the same person, usually an adult child who is responsible and has good decision-making skills.

There are different types of power of attorney roles. The most common is the general power of attorney, followed by the health care or medical power of attorney. The general power of attorney refers to the person who has the authority to handle financial, business or private affairs. If a parent grants power of attorney to one of their children, that child then has the authority to act on behalf of the parent.

Trouble starts if the relationship between siblings is rocky, or if major decisions are made without discussions with siblings.

It’s not easy for siblings when one of them has been granted the power of attorney. That means they must accept the inherent authority of the chosen sibling to make all decisions for their parent. The sibling with the power of authority will have a smoother path if they can be sensitive to how this makes the others feel.

“Mom always liked you best,” is not a sentence that should come from a 50 year old, but often childhood dynamics can reappear during these times.

Remember that the power of attorney is also a fiduciary obligation, meaning that the person who holds it is required to act in the best interest of the parent and not their own. If the relationship between siblings is not good, or there’s no transparency when decisions are made, things can get bumpy.

Here are some tips for parents to bear in mind when deciding who should be their power of attorney:

  • Understand the great power that is being given to another person.
  • Make sure the person who is to be named POA understands the entire range of responsibilities they will have.
  • The siblings who have not been named will need to understand and respect the arrangement. They should also be aware of the potential for problems, keeping their eyes open and being watchful without being suspicious.

Some families appoint two siblings as a means of creating a “checks and balances” solution. This can be set up so the agents need to act jointly, where both agree on an action, or independently, where each has the full authority to act alone. In some cases, this will lesson the chances for jealousy and mistrust, but it can also prolong the decision-making process. It also creates the potential for situations where the family is engaged in a deadlock and important decisions don’t get made.

Parents should discuss these appointments with their estate planning attorney. Their years of experience in navigating family issues and dynamics give the attorneys insights that will be helpful with assigning these important tasks.

Reference: Considerable.com (July 10, 2019) “How to assign power of attorney without sparking a family feud”, and edited for Florida relevance 

 

Why It’s Always Better to Plan Ahead

Two stories of two people who managed their personal lives very differently illustrate the enormous difference that can happen for those who refuse to prepare themselves and their families for the events that often accompany aging. As an article from Sedona Red Rock News titled “Plan ahead in case of sudden sickness or death” makes clear, the value of advance planning becomes very clear. One man, let’s call him Ben, has been married for 47 years and he’s always overseen the family finances. He has a stroke and can’t walk or talk. His wife Shirley is overwhelmed with worry about her husband’s illness. Making matters worse, she doesn’t know what bills need to be paid or when they are due.

On the other side of town is Louise. At 80, she fell in her own kitchen and broke her hip, a common injury for the elderly. After a week in the hospital, she spent two months in a rehabilitation nursing home. Her son lives on the other side of the country, but he was able to pay her bills and handle all the Medicare issues. Several years ago, Louise and her son had planned what he should do in case she had a health crisis.

More good planning on Louise’s part: all her important papers were organized and put into one place, and she told her son where they could be found. She also shared with him the name of her attorney, a list of people to contact at her bank, primary physician’s office, financial advisor, and insurance agent. She also made sure her son had copies of her Medicare and any other health insurance information. Her son’s name was added to her checking account and to the safe deposit box at the bank. And she made sure to have a legal document prepared so her son could talk with her doctors about her health and any health insurance matters.

And then there’s Ben. He always handled everything and wouldn’t let anyone else get involved. Only Ben knew the whereabouts of his life insurance policy, the title to his car, and the deed to the house. Ben never expected that someone else would need to know these things. Shirley has a tough job ahead of her. There are many steps involved in getting ready for an emergency, but as you can see, this is a necessary task to start and finish.

First, gather up all your important information. That includes your full legal name, Social Security number, birth certificate, marriage certificate, divorce papers, citizenship or adoption papers, information on employers, any military service information, phone numbers for close friends, relatives, doctors, estate planning attorney, financial advisor, CPA, and any other professionals.

Your will, power of attorney, health care power of attorney, living will and any directives should be stored in a secure location. Make sure at least two people know where they are located. Talk with your estate planning attorney to find out if they will store any documents on your behalf.

Financial records should be organized. That includes all your insurance policies, bank accounts, investment accounts, 401(k), or other retirement accounts, copies of the most recent tax returns, and any other information about your financial life.

Advance planning does take time, but not planning will create havoc for your family during a difficult time.

Reference: Sedona Red Rock News (July 9, 2019) “Plan ahead in case of sudden sickness or death”

 

What Can I Do with a Trust to Help My Kids?

Young people like to keep things simple. Millennials don’t want their parents’ furniture or antiques. They want to be able to move easily without a lot of headache. Millennials are okay with jewelry, art, and cash. Likewise, with estate planning, Millennials want a simple will. This can be a wise choice if they’re just married and under the estate tax threshold. But when they have children of their own, they should consider a trust.

Forbes’s recent article, “Why A Simple Will Won’t Cut It If You Have Young Children,” explains that without a trust, minor children inherit assets outright when they turn 18. And that may be a problem if your kids are apt to blow through their inheritance in a few years, instead of using the money wisely.

But an inheritance could last a lifetime if the beneficiary lives within her means, doesn’t tap into the principal, and works to help support her lifestyle and supplement her income. But this isn’t always the case.

A trustee can make certain that your children and young adults are cared for long-term. If you’re not alive to guide and direct your children, a trust can set the necessary limitations for their finances. Also, the trustee can help with your children’s financial literacy, so they’ll possess tools if and when they’re given additional responsibility for their inherited assets.

This isn’t just for minor kids who are under 18 years old, but also for young adults. The fact that a child is “legal” in the eyes of the law doesn’t mean she’s responsible enough to invest a million-dollar inheritance. A trust sets up an experienced advisor to manage inherited assets along the way.

One option, when they’re mature enough, is to set up the trust so they will become a co-trustee. This lets them have a say with the trustee and to make decisions about the management of the trust assets. Your trust can also give them access to distributions of principal slowly over time, so they get used to managing large sums of money.

Other options include appointing a Trust Advisor/Trust Protector that can oversee and protect the trust, its assets & the beneficiaries as time goes on and things change regarding same.

Simple solutions can work for some people, and there are definitely situations in which a simple will is appropriate. But if you have minor children, you usually don’t want to allow them to inherit money at 18.

Ask your estate planning attorney about the options available to set up a trust to work for your family.

Reference: Forbes (July 12, 2019) “Why A Simple Will Won’t Cut It If You Have Young Children”