How the Blended Family Benefits from an Estate Plan

How the Blended Family Benefits from an Estate Plan: With about half of all marriages ending in divorce, second marriages and blended families have become the new normal in many communities. Estate planning for a blended family requires three-dimensional thinking for all concerned.

An article from The University Herald, “The Challenges and Complexities of Estate Planning for Blended Families, ” clarifies some of the major issues that blended families face. When creating or updating an estate plan, the parents need to set emotions aside and focus on their overall goals.

Estate plans should be reviewed and updated, whenever there’s a major life event, like a divorce, marriage or the birth or adoption of a child. If you don’t do this, it can lead to disastrous consequences after your death, like giving all your assets to an ex-spouse.

If you have children from previous marriages, make sure they inherit the assets you desire after your death. When new spouses are named as sole beneficiaries on retirement accounts, life insurance policies, and other accounts, they aren’t legally required to share any assets with the children.

Take time to review and update your estate plan. It will save you and your family a lot of stress in the future.

Your estate planning attorney can help you with this process.

You may need more than a simple will to protect your biological children’s ability to inherit. If you draft a will that leaves everything to your new spouse, he or she can cut out the children from your previous marriage altogether. Ask your attorney about a trust for those children. There are many options.

You can create a trust that will leave assets to your new spouse during his or her lifetime, and then pass those assets to your children, upon your spouse’s death. This is known as an AB trust. There is also a trust known as an ABC trust. Various assets are allocated to each trust, and while this type of trust can be a little complicated, the trusts will ensure that wishes are met, and everyone inherits as you want.

Be sure that you select your trustee wisely. It’s not uncommon to have tension between your spouse and your children. The trustee may need to serve as a referee between them, so name a person who will carry out your wishes as intended and who respects both your children and your spouse.

Another option is to simply leave assets to your biological children upon your death. The only problem here, is if your spouse is depending upon you to provide a means of support after you have passed.

An estate planning attorney who routinely works with blended families will be able to help you work through the myriad issues that must be addressed in an estate plan. Think of it as a road map for the new life that you are building together.

Reference: University Herald (June 29, 2019) “The Challenges and Complexities of Estate Planning for Blended Families”

 

 

Planning for the Impact of Medicaid

Planning for the Impact of Medicaid: One of the most complicated and fear-inducing aspects of Medicaid is the financial eligibility. The rules for the cost of long-term care are complicated and can be difficult to understand. This is especially true when the Medicaid applicant is married, as reported in the Delco Times in the article “Medicaid–Protecting Assets for a Spouse.”

While each state is different, the State of Florida mandates that to be eligible for Medicaid long-term care, the applicant may not have more than $2,000 in countable assets in their name, and a gross monthly income of not more than $2,313. That’s the 2019 asset and income limits.

There are Federal laws that mandate certain protections for a spouse, so they do not become impoverished when their spouse enters a nursing home and applies for Medicaid. This is where advance planning with an experienced elder law attorney is needed. The spouse of a Medicaid recipient living in a nursing home, who is referred to as the Community Spouse, is permitted to keep as much as $126,420, known as the “Community Spouse Resource Allowance,” without putting the Medicaid eligibility of the applicant spouse who needs long-term care at risk. The rest of the applicant spouse’s assets must be spent down. The community spouse’s assets will either have to be spent down or “planned for”. A seasoned elder law attorney is essential in this regard.

Countable assets for Medicaid include all belongings. However, there are a few exceptions. These are personal possessions, including jewelry, clothing and furniture, one car, the applicant’s principal residence (if the equity in the home does not exceed $585,500 in 2019) and certain retirement accounts under certain circumstances.

Unless an asset is specifically excluded, it is countable.

There are also Federal rules regarding how much the spouse is permitted to earn. This varies by state. In Florida as of 2019, the community spouse’s income is unlimited.

The rules regarding requests for additional income are also very complicated, so an elder law attorney’s help will be needed to ensure that the spouse’s income aligns with their state’s requirements.

These are complicated matters, and not easily navigated. Talk with an experienced elder law attorney to help plan in advance, if possible. There are many different strategies that can be implemented to help preserve & protect your assets and they are best handled with experienced professional help.

Reference: Delco Times (June 26, 2019) “Medicaid–Protecting Assets for a Spouse” and edited for Florida reference. 

Think of Estate Planning as Stewardship for the Future

Despite our love of planning, the one thing we often do not plan for, is the one thing that we can be certain of. Our own passing is not something pleasant, but it is definite. Estate planning is seen as an unpleasant or even dreaded task, says The Message in the article “Estate planning is stewardship.” However, think of estate planning as a message to the future and stewardship of your life’s work.

Some people think that if they make plans for their estate, their lives will end. They acknowledge that this doesn’t make sense, but still they feel that way. Others take a more cavalier approach and say that “someone else will have to deal with that mess when I’m gone.”

However, we should plan for the future, if only to ensure that our children and grandchildren, if we have them, or friends and loved ones, have an easier time of it when we pass away.

A thought-out estate plan is a gift to those we love.

Start by considering the people who are most important to you. This should include anyone in your care during your lifetime, and for whom you wish to provide care after your death. That may be your children, spouse, grandchildren, parents, nieces and nephews, as well as those you wish to take care of with either a monetary gift or a personal item that has meaning for you.

This is also the time to consider whether you’d like to leave some of your assets to a house of worship or other charity that has meaning to you. It might be an animal shelter, community center, or any place that you have a connection to. Charitable giving can also be a part of your legacy.

Your assets need to be listed in a careful inventory. It is important to include bank and investment accounts, your home, a second home or any rental property, cars, boats, jewelry, firearms and anything of significance. You may want to speak with your heirs to learn whether there are any of your personal possessions that have great meaning to them and figure out to whom you want to leave these items. Some of these items have more sentimental than market value, but they are equally important to address in an estate plan.

There are other assets to address: life insurance policies, annuities, IRAs and other retirement plans, along with pension accounts. Note that these assets likely have a beneficiary designation and they are not distributed by your will. Whoever the beneficiary is listed on these documents will receive these assets upon your death, regardless of what your will says.

If you have not reviewed these beneficiary designations in more than three years, it would be wise to review them. The IRA that you opened at your first job some thirty years ago may have designated someone you may not even know now! Once you pass, there will be no way to change any of these beneficiaries.

Work with an experienced estate planning attorney to create your last will and testament. For most people, a simple will can be used to transfer assets to heirs.

Many people express concern about the cost of estate planning. Remember that there are important and long-lasting decisions included in your estate plan, so it is worth the time, energy and money to make sure these plans are created properly.

Compare the cost of an estate plan to the cost of buying tires for a car. Tires are a cost of owning a car, but it’s better to get a good set of tires and pay the price up front, than it is to buy an inexpensive set and find out they don’t hold the road in a bad situation. It’s a good analogy for estate planning.

Reference: The Message (June 14, 2019) “Estate planning is stewardship.”

 

Talking About Financial Planning with Aging Parents

Talking About Financial Planning with Aging Parents: Unless you are raised in a family that talks about money, values and planning, starting a conversation with elderly parents about the same topics can be a little awkward. However, it is necessary.

In a perfect world, we’d all have our estate plans created when we started working, updated when we married, updated again when our kids were born and had them revised a few times between the day we retired and when we died. In reality, a recent report by Merrill Lynch and Age Wave says that only half of Americans have a will by age 50.

More than 50% said their lack of proper planning could leave a problem for their families.

CNBC’s recent article, “How to have ‘the (money) talk’ with your parents,” explains that, according to the study, just 18% of those 55 and older have the estate planning recommended essentials: a will, a health-care directive and a power of attorney.

To start, get a general feel for your aging parents’ financial standing.

This should include where they bank, and whether there’s enough savings to cover their retirement and long-term care. If they don’t have enough saved, they’ll lean on you for support.

Next, start a list of the legal documents they do have, such as a power of attorney, a document that designates an agent to make financial decisions on their behalf and a health-care directive that states who has the authority to make health decisions for them.

You should include information on bank accounts and other assets. It is also important to list their passwords to online accounts and Social Security numbers.

Next, your parents should create an estate plan, if they don’t already have one. When you put a plan in place for how financial accounts, real estate and other assets will be distributed, it helps the family during what’s already a difficult time. Having an estate plan in place keeps the courts from determining where these assets go.

While you’re at it, talk to your own children about your financial picture.

Many people think they don’t need to yet have the talk. However, the perfect time to have the conversation, is when you are healthy.

Here’s an encouraging fact: young adults who discuss money with their parents are more likely to have their own finances under control. They are also more likely to have a budget, an emergency fund, to put 10% or more of their income toward savings and have a retirement account. That’s all according to a separate parents, children and money survey from T. Rowe Price.

For many families, having a conversation during a family meeting at their estate planning attorney’s office while working on their estate plan, is a good way to start a dialogue. Working with a professional who has the family’s best interest in mind, with two or even three generations in the room, can prevent many stressful problems for the family in the future.

Reference: CNBC (June 30, 2019) “How to have ‘the (money) talk’ with your parents”

 

 

The Decedent’s Debts: Who’s on First?

The Decedent’s Debts: Who’s on First? Estate planning attorneys are used to family members who, for some reason, determine that credit card bills need to be paid off first, when a loved one dies. It’s not the first thing to pay, advises The Mercury its article “There is a priority of debts when you die.”

In fact, credit card debt is unsecured debt. It is, therefore, on the bottom of a list of priorities in many states. Paying debts is an important part of executor responsibilities, but there is an order to what debts must be paid first. If there are cash flow issues for the estate, this is critical information.

First, the funeral home, nursing home and un-reimbursed medical bills should be paid within six months of the death, as well as administrative expenses. Administrative expenses include the cost of probate, which is filing the will and professional fees, including the attorney’s fees, executor’s fees, account fees for final tax returns, etc. Don’t ignore the funeral bill.

Nursing home and medical bills incurred within six months of death are also important to pay. If the executor believes the medical bill is to be paid by health insurance, Medicare or Medicaid, get this in writing. If Medicaid paid for care, there may be a claim under Estate Recovery. In Pennsylvania, the Department of Human Services; Third Party Recovery, could become a creditor of the estate, when a large asset like the home is sold.

This is a time when an attorney experienced in elder law and trusts and estates can help sort through what needs to be paid and when and where the money should come from.

There are times when an executor pays for administrative expenses or the cost of the funeral from their own pocket. Anyone who does this must maintain careful records and be sure to be repaid by the estate, after an estate account is established. That also applies for any expenses paid from a joint account with the decedent.

The responsibility of the executor is to pull together the assets that will pass through the will and the bills or debts that need to be paid, then to pay the debts, including taxes and expenses of probate, then distribute the remaining funds to beneficiaries, as directed by the will.

Some assets do not pass through the will, like joint bank accounts, payable on death and transfer on death accounts, life insurance and retirement funds. With the exception of life insurance, they may be subject to inheritance taxes, if the decedent’s state of residence has such a tax.

If there are not enough assets to pay the bills, states have lists of the order of distribution. At the top of the list: costs of the administration of the estate and funeral expenses. Medical bills from the most recent six months are given higher priority than older medical bills. Credit card bills are at the bottom of the list.

Secured debt, like the mortgage on the house or a loan on a car need to be addressed. These may be sold to pay off the debt.

Executors or family members who are contacted by creditors demanding payment need to know whether they are responsible or not. An experienced estate planning attorney will be able to help you work your way through the debts and financial responsibilities of the decedent.

Reference: The Mercury (June 18, 2019) “There is a priority of debts when you die”

 

What Do I Need to Know About Special Needs Trusts?

What Do I Need to Know About Special Needs Trusts? One of the hardest issues in planning for a child with special needs, is trying to calculate how much money it’s going to cost to provide for the child, both while the parents are alive, and after the parents die.

A recent Kiplinger’s article asks How Much Should Go into Your Special Needs Trust?” As the article explains, a special needs trust, when properly established and managed, lets someone with a disability continue getting certain public benefits.

Even if the child isn’t getting benefits, families may still want the money protected from the child’s financial choices or those who may try to take advantage of them. A trustee can help manage the assets and make distributions to the child with special needs to supplement his lifestyle beyond what public program benefits provide.

A child with special needs can have multiple expenses, and the amount will depend on the needs and lifestyle of the family and the child’s capabilities. One of the biggest unknowns is the cost of housing. If the plan is for the child to live in a private group home-type situation, there are options. Some involve the purchase of a condo in a building with services for those with special needs. Many families also add into the budget eating out once a week, computers and phones and other items.

When the parents pass away, this budget will need to increase, because what the parents did for their child must be monetized.

Fortunately, public benefits can usually offset many of the basic costs for a child with special needs. For example, the child may be eligible for Supplemental Security Income (SSI), as well as a Section 8 housing voucher and SNAP food assistance. When the parents retire, SSI is typically replaced with Social Security Disability Insurance (SSDI), which is one-half the parent’s payment.

When the parent dies, this payment becomes three-quarters of that amount. Adult Family/Foster Care may be available. That will depend on the group housing situation.

The child may also be working and bringing in additional income (minus whatever benefits may be offset by this income).

It’s vital to do a complete analysis of the future costs to provide for a child with special needs, so parents can start saving and making adjustments in their planning right away.

The laws on this planning may vary from state to state, so be sure to contact an experienced elder law attorney.

Reference: Kiplinger (June 10, 2019) “How Much Should Go into Your Special Needs Trust?”

 

Is Estate Planning Really Such a Big Deal?

Delaying your estate planning is never a good idea, says The South Florida Reporter, in the new article entitled “Why Estate Planning Is So Important.” That’s because life can be full of unexpected moments and before you know it, it’s too late. Estate planning is for everyone, regardless of financial status, and especially if they have a family that is very dependent on them.

Estate planning is designed to protect your family from complications concerning your assets when you die. Many people believe that they don’t require estate planning. However, that’s not true. Estate planning is a way of making sure that all your assets will be properly taken care of by your family, if you’re no longer able to make your decisions due to incapacity or death.

Without estate planning, a court will name a person—usually a stranger—to handle your assets and finances when you die. This makes the probate process lengthy and stressful. To protect your assets after you die, you need to have an estate plan in advance. You also need to address possible state and federal taxes. Your estate plan is a way to decrease your tax burdens.

With a proper estate plan, your final wishes for your assets will be set out in a legal document. With a will or trust, all of your assets will be distributed to your beneficiaries, according to your final wishes.

This will also save your family from having to deal with the distribution of your assets, which can become very complicated without a will. There can also be family fights from the process of distributing assets without a will.

It is also important to remember that if you do create an estate plan, you’ll need to update it every once in a while—especially if there’s a significant event that happened in your life, like a birth, a death, or a move. Your estate plan should be ever-changing, since your assets and your life can also change.

It’s vital that you work with an experienced estate planning attorney, who can help you draft the legal documents that will make certain your family is taken care of after you pass away.

Reference: South Florida Reporter (June 12, 2019) “Why Estate Planning Is So Important”

 

When Is It Time to Update A Will?

Notice that the title is not “if” you need to update a will, but “when.” A will is like the family pet—it can protect the house and demonstrate your love for your family. However, you have to take care of it.

People often comment when they complete their estate planning, that they feel so good to have done this very important task. It’s a great feeling to know that you’ve made the necessary preparations to protect your family and preserve your legacy. However, this is not a one-and-done event.

Thrive Global’s recent article, “7 Reasons Why You Need to Review your Will Right Now,” says it’s extremely important that you regularly update your will to avoid any potential confusion and extra stress for your family at a very emotional time. As circumstances change, you need to have your will reflect changes in your life. As time passes and your situation changes, your will may become invalid, obsolete or even create added confusion, when the time comes for your will to be administered.

New people in your life. If you do have more children after you’ve created your will, review your estate plan to make certain that the wording is still correct. You may also marry or re-marry, and grandchildren may be born that you want to include. Make a formal update to your estate plan to include the new people who play an important part in your life and to remove those with whom you lose touch.

A beneficiary or other person dies. If a person you had designated as a beneficiary or executor of your will has died, you must make a change or it could result in confusion, when the time comes for your estate to be distributed. You need to update your will, if an individual named in your estate passes away before you.

Divorce. If your will was created prior to a divorce, and you want to remove your ex from your estate plan, talk to an estate planning attorney about the changes you need to make.

Your spouse dies. Wills should be written in such a way as to always have a backup plan in place. For example, if your husband or wife dies before you, their portion of your estate might go to another family member or another named individual. If this happens, you may want to redistribute your assets to other people.

A child becomes an adult. When a child turns 18 and comes of age, she is no longer a dependent.  Therefore, you may need to update your will in any areas that provided additional funds for any dependents.

You experience a change in your financial situation. This is a great opportunity to update your will to protect your new financial situation.

You change your mind. It’s your will, and you can change your mind whenever you like.

No matter how good it is, the will that was created four years ago is not necessarily the right will for you now. Tax laws have changed and your life probably has had some changes too. You may not need to revise the entire estate plan, but sit down with an estate planning attorney for a review. Don’t neglect your beneficiary designations—they need to be reviewed and updated too.

Reference: Thrive Global (June 17, 2019) “7 Reasons Why You Need to Review your Will Right Now”

 

How To Avoid Senior Financial Abuse

How To Avoid Senior Financial Abuse:  Medical research has demonstrated a clear link between accelerated cognitive aging to financial vulnerability, even without any kind of dementia. In other words, as described in the article “Be prepared to avoid financial exploitation” from SBJ, we may feel fine and we may be fine, but our cognitive abilities change as we age.

One of the first signs of cognitive decline is diminished financial capacity, or the progressive loss of a person’s ability to manage banking and investment decisions. If you have an aging parent, you may have seen them struggle with tasks that were previously easy for them to do, like balancing a checkbook or tracking investments.

It’s estimated that for every 44 cases of senior financial abuse, only one is reported to authorities.  In a 2010 study by a nonprofit, one in five adults 65 and older have been a victim of financial fraud or manipulation.

There are several actions that can be taken to mitigate the risk of financial fraud and exploitation. However, the first one is planning before signs of cognitive impairment are seen. Here’s how:

Financial preparation. First, designate a trusted emergency contact for all financial accounts to receive information, if the institution suspects exploitation. Have an estate planning attorney create a durable power of attorney to appoint a trusted individual to act on your behalf. “Durable” means that it will remain in effect, even if you become incapacitated.

Prepare a will to dispose of assets after your death.

Don’t discuss your will or any financial matters with people who are new in your life. That includes caregivers, the new neighbor down the street or people who call claiming some distant connection.

Monitor your credit report and stay up to date with the latest in scams. Seniors are now being targeted by thieves presenting themselves as calling from the Social Security Administration and threatening to cut off benefits. The SSA does not call to threaten individuals, and it never asks for payment in gift cards.

Plan how to transition your financial accounts. That may mean having a professional manage your finances, but make sure they are a licensed fiduciary, so that your interests must come first. Your estate planning attorney may know of these services.

Not all financial institutions have addressed the issue of safeguarding customers from financial fraud and exploitation. Find out what your bank, financial advisor and investment companies are doing. Do they monitor accounts for unusual transactions? What tools are available to account holders to detect suspicious activity?

Speak with your estate planning attorney about making sure all  your legal documents are properly prepared for any cognitive decline, to protect yourself and your family.

Reference: SBJ (June 10, 2019) “Be prepared to avoid financial exploitation”

 

These Money Mistakes Add Up Fast

It’s not how much you earn, but how much you keep that makes the difference in lifestyle and retirement. Keep more of your hard-earned money, by making fewer money mistakes.

Some of the most common money mistakes cost thousands of dollars. All you need to do is pay attention to avoid them, says Motley Fool in the article, “5 Money Mistakes You Probably Don’t Even Realize You’re Making.” See if any of these sound familiar and take control of your financial health today.

No clue to recurring charges. Unless you regularly review your credit card bills, you can easily miss monthly charges that you don’t need, like not cancelling a gym membership. Some automatic monthly charges increase over time, which you won’t notice unless you’re checking those bills.

Working too long at a job. You may believe that you’ve done well to have stayed at your current job for long time. However, in order to maximize your income, you might want to think about moving to a better paying job. The human resource management company ADP studied data on 24 million workers, and found that workers get their biggest increases in salaries, when they’ve been at a job for more than two years, but not more than five years.

Failing to request a raise. It is true that job-hopping isn’t for everyone. However, you can earn more in your current position, by asking for a raise. A recent PayScale survey found that among those who asked for a raise at work, about 70% received some sort of increase. However, only 37% ever asked for a raise.

Failing to regularly review your insurance. Insurance isn’t something to set and forget, if you want to keep your costs down. Take some time every year to contact a variety of insurers to review your coverage for each kind of insurance and to get new quotes. Shopping around for better rates regularly, can potentially save you hundreds of dollars per year. Another way to save on insurance is to bundle your policies with one carrier.

Failing to have an estate plan. Everyone needs to have a will prepared, a power of attorney for finances, a health care power of attorney and a living will. People procrastinate and then life happens. Their spouses or children are left to go to court for the ability to manage finances, or the wrong heirs receive an inheritance. Make an appointment with an estate planning attorney to create the estate plan that is right for you and your family. Don’t neglect to check your beneficiary designations on retirement and investment accounts, as well as on any life insurance policies you own.

Reference: Motley Fool (June 12, 2019) “5 Money Mistakes You Probably Don’t Even Realize You’re Making”