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Hopefully you and your spouse have already begun the communications concerning your respective ideas for retirement. And ideally you agree on the major issues like where you’ll live, when you both plan to retire, and what you want to do in retirement, says the Rocky Mount Telegram’s article, “Retirement and estate planning is a family affair.” However, you both might have let some things slip through the cracks. These are the important specifics related to financing your retirement. So you’ll need to answer questions like these: When will you each start drawing Social Security? What’s your plan for maximizing your Social Security payments? When will you need to start withdrawing from your respective retirement accounts like IRAs and 401(k)s and when you do, how much should you take out each year? It would be wise to sit down with an experienced estate planning attorney to look into these issues and to make sure that you and your spouse are “singing from the same hymnal”—or in other words, on the same page when it comes to these key financial elements of your retirement. Next, think about your grown children. You should communicate your estate plans to them clearly, not just for the sake of openness and honesty, but also because they may have responsibilities and active roles. When talking to them, make sure you cover things like a durable power of attorney, the executor of your estate, and the status of your will and living trust. These documents will contain a lot of information your children should know, so spend some time explaining your rationale for your decisions in these documents. Reference: Rocky Mount Telegram (June 24, 2016) “Retirement and estate planning is a family affair” #AssetProtection #IRAs #401k #RetirementPlanning #estateplanning

According to a recent article in the Sacramento Bee, titled “Reports of elder financial abuse surge in Sacramento County,” elder financial abuse reports jumped by 72% last year in Sacramento County, California, with greater public awareness of these crimes, more baby boomers retiring, and the ease of perpetrating scams via technology. Sacramento County says it’s better prepared to deal with the uptick in cases after reinstating a financial abuse unit within Adult Protective Services in January 2015. The financial unit was eliminated during the recession, but now has been reinstated due to concerns that the county couldn’t handle an increase in financial abuse claims. Reports of elder abuse have been increasing for the past few years, and experts believe that demographic and technological trends mean that the crimes will continue. A Met Life report called financial scams against the elderly “the crime of the 21st century.” One contributing factor is the aging of our population. Baby boomers are now in their senior years. Another is technological, with scam artists leveraging the internet to make phone calls that appear to have been made close to home. Finally, greater public awareness looks to have peaked last year at the same time reports went up in Sacramento County. In June 2015, the county paid for an advertising supplement in several publications that explained the types of issues dealt with by Adult Protective Services. APS received 403 reports the same month, which was a record. In addition to these efforts, financial institutions have become more aware of scams against the elderly. This is due in part because a state law requires them to report suspected abuse to the county. But scams are now more sophisticated, and the elderly are often lonely and more apt to engage with people and become vulnerable. Financial abuse is the most common type of report received by Adult Protective Services. The agency also handles complaints of sexual and physical abuse, in addition to other forms of mistreatment. In the event an investigation does not rise to the level of criminal activity, case workers help by closing bank accounts, finding financial managers, and providing other assistance. Reference: Sacramento Bee (June 25, 2016) “Reports of elder financial abuse surge in Sacramento County” #ElderAbuse #ElderLaw #estateplanning

June 26 is the day last year that the Supreme Court declared same-sex marriage legal in the U.S. Bankrate’s article, “Same-sex marriage tax and estate planning tips,” says the IRS had been accepting jointly filed federal tax returns from same-sex couples married in states that sanctioned their unions since the Supreme Court struck down the Defense of Marriage Act in 2013. But last year’s decision in Obergefell v. Hodges made taxes less troublesome for gay and lesbian married couples at the state and federal levels across the United State. Same-sex married couples no longer need double duty for state and federal tax filing because the Supreme Court ruling allows joint filing at both levels. There is no need to file differently with a state tax department in a state that previously didn’t recognize same-sex marriages. The court ruling also opened up a new world of estate planning for same-sex married couples. With that in mind, here are some estate planning tips. Marital deduction and portability. Same-sex married couples are now able to use the unlimited marital deduction from federal estate tax and gift tax for transfers between spouses. In most situations, one spouse can leave an unlimited amount to his or her surviving spouse without any federal estate tax liability. Also, the portability provisions of federal gift and estate tax laws typically allow a surviving spouse, regardless of gender, to use any portion of his or her deceased spouse’s unused applicable estate and gift exclusion amount—for 2016, that amount is $5.45 million per spouse. Greater gift splitting. Same-sex married couples also now can use gift splitting—with the annual gift exclusion amount of $14,000. A same-sex spouse is allowed—with the consent of his or her husband or wife—to give a total as if each spouse contributed half of the amount. This lets married couples increase their total gift tax exemption amount. Tax and estate help. Some states have their own estate taxes in addition to the federal estate tax. Don’t allow a state tax collector to get a big chunk of your estate in taxes by failing to plan for estate taxes. Every state has different tax laws, which is another reason for all married couples to speak with an estate planning attorney, as these laws are complex and confusing. Reference: Bankrate (June 23, 2016) “Same-sex marriage tax and estate planning tips” #AssetProtection #EstateTax #SamesexMarriage #MaritalDeduction #Portability #TaxPlanning #estateplanning

A recent article from NJ 101.5, “Should you leave a business in your will?,” asks whether using a will for business succession may have estate tax consequences. That tax might have been substantially reduced or eliminated with good estate planning by parents who want to transfer a business to their children or other relatives. The federal estate tax exemption is $5.45 million per person this year, plus any state exemption amount. That means if the business is generating some decent revenue, there’s a good possibility that estate taxes could hit after the parents are gone. Just a third of all family businesses make a successful transition to the second generation because many issues can create obstacles. For instance, the interest of one family member may be different than other family members. As part of this process, you should identify the successors, the active and non-active roles for each family member, and the additional support from family members needed by the successors. Small family-owned businesses frequently will transfer shares of the business during the owners’ lifetime to address transfer tax consequences. These transfers can be structured so that the owners will keep control during their lifetime. Parents, speak with a qualified estate planning attorney to assist with wise succession planning. That way you can decide the most effective way to transfer your business without incurring unnecessary transfer taxes. Reference: NJ 101.5 (June 15, 2016) “Should you leave a business in your will? #BusinessSuccession #EstatePlanningLawyer #EstateTax #TaxPlanning

The good news is that you’re going to live a long life. The bad news is that you may face the difficult transition of requiring nursing home care without having the assets to pay for this. If you have no assets, Medicaid will pay for nursing care—but only after you’ve spent most of your own resources. The US News article, “What to Consider If You May Depend on Medicaid for Nursing Care,” says that trying to qualify for Medicaid can be tough, and it may leave your spouse or heirs with less than you’d imaged. For that reason, you should plan for the possibility that you’ll outlive your assets for years or decades. Your planning should start while you’re still young. Almost every American, regardless of income or assets, is eligible for Medicare to cover his or her health care in retirement. Medicare covers doctor visits, treatments, hospitalization, and drugs. It also covers a short-term stay in a nursing home for rehab, but it does not pay for any type of long-term care. The cost of nursing home care averages $225 a day for a semi-private room, which will quickly consume a modest estate. Medicaid covers medical care for poor people of any age and will pay for long-term care in a nursing home. However, this is only for those who meet specific asset and income guidelines, which vary by state. Medicaid is designed to protect those with limited incomes, but planning could be the difference between keeping the family home for the next generation and being forced to sell. Planning for end-of-life care should be part of retirement and estate planning. Talk with an attorney who specializes in Medicaid planning. Remember that not all facilities accept Medicaid patients, and they’re not required to accept it. Some facilities only have a certain number of beds for Medicaid patients. Eligibility rules and asset limits vary by state, and most let you keep your house and some assets and still qualify for Medicaid. However, the state will look back five years to determine your eligibility for Medicaid, meaning the state will analyze the assets you’ve given away or otherwise disposed of in the past five years. Also, if you sell assets at less than market value to heirs or otherwise give away assets, it might delay your Medicaid eligibility. The asset calculations will consider a healthy spouse. Typically, a healthy spouse can keep half of the joint assets up to a certain ceiling plus enough income to live on when his or her spouse qualifies for Medicaid. This amount may vary by state and situation. In addition, the state may try to recoup its cost after your death, either through filing a claim against the estate or filing a lien against property; however, the property usually is safe as long as the surviving spouse is living. Transferring assets to children may have tax consequences, such as capital gains and gift taxes. Typically, it’s not a good strategy to gift highly appreciated assets. You may want to spend down assets on long-term care insurance if you expect to outlive your assets. This might be preferable to Medicaid. Some hybrid products combine life insurance and long-term care or annuities and long-term care. The size of the death benefit is based on if the long-term care is used. Reference: US News (June 9, 2016) “What to Consider If You May Depend on Medicaid for Nursing Care” #PayingforaNursingHome #GiftTax #MedicaidPlanningLawyer #CapitalGains #LifeInsurance #MedicaidNursingHomePlanning #ElderLaw #estateplanning #LongTermCarePlanning

Some of the money that’s owed is from Whitney’s song and performance royalties. There’s also a $9 million dispute over the value of her album catalog. The Whitney Houston estate claims that the IRS is in error by increasing the value of her publicity rights from $11.5 million to $11.7 million. There’s no indication as to the agency’s rationale for the increase, but it shows that the IRS means business and will continue to pursue money from the name and image of dead stars. A trial is scheduled for next February. Right now, the IRS is currently in court fighting with another pop legend’s estate. The Michael Jackson estate is litigating over the value of his publicity rights. The IRS originally stipulated that the value of these rights upon death was $434 million. However, it has recently backed off from this precise amount. On the other hand, the Michael Jackson estate argued it’s worth just $2,105. Reference: Billboard (May 27, 2016) “Whitney Houston Estate Challenges $11 Million Tax Bill” #estateplanning #IRS #TaxPlanning

Life insurance can be very complicated and confusing. It’s also an area where mistakes can be made very easily. A recent study that looked at the life insurance purchased by 94 ultra-wealthy business owners with a net worth of $30 million or more showed that roughly 40% of them didn’t have the appropriate level or type of life insurance—or it wasn’t properly structured to meet their needs and goals. A recent Forbes article, “How The Ultra-Wealthy Avoid Life Insurance Missteps,” says that there were several reasons for these results. The most common mistake made by more than 80% of the business owners was buying more life insurance than actually was necessary. Also, for 60% of these uber-wealthy business owners, their life insurance wasn’t effectively integrated with their estate plans. For example, if the policies are not held in irrevocable trusts, then the proceeds are included in the estate values and are subject to estate taxes. About 75% of these surveyed business owners had policies that were simply wrong for their specific situations. Each of us should have the type of life insurance that addresses the particular needs of our individual situations. While the study was just exploratory, it demonstrates the need for working with a highly experienced and reputable life insurance specialist. Choose to be like one of the remaining 60% of successful business owners in the study who have the right amount of the right kind of life insurance that is properly structured. The results of the research also suggest the practicality of a second opinion. If you have questions or uncertainty about the appropriateness of a life insurance policy, there’s no harm in getting a second opinion. Whether you are ultra-wealthy or an ordinary purchaser of life insurance, there’s the possibility of making costly mistakes or not being able to get the desired results. We all should be discerning when talking with a life insurance specialist, as not all have our best interests in mind. Don’t forget to speak with your estate planning attorney to make sure that the insurance you have is properly structured. Reference: Forbes (June 7, 2016) “How The Ultra-Wealthy Avoid Life Insurance Missteps” #estateplanning #EstateTax #LifeInsurance #TaxPlanning

The Huffington Post says that more than 40% of people over age 65 need care in a nursing home for some period of time. The article, “What is Long Term Care?”, quotes the National Institute of Health (NIH), which states that what’s termed long-term care (LTC) can—in reality—be a long time or a short time. Long-term care can be in an institution or at home, based on the patient’s specific situation and needs. LTC is now a very broad term and has evolved into a term for the type of care required instead of the time period. The need for this care can be because of a sudden event like a fall, or it can develop gradually. Before someone reaches the point where total personal care is required for his or her activities of daily living (ADLs), other ancillary services might be necessary. There are adult day care and senior centers to help them socialize and keep active. Even when elder care doesn’t mean admission to a facility, caregiving demands may make paid LTC with a home health aide a necessity. AARP found that more than 40 million Americans provided unpaid care to adults last year, with an average of 44. Beyond an individual’s personal savings, long-term care insurance is available with many options and levels of coverage. It’s more affordable the earlier you sign on. LTC insurance will typically cover care not covered by health insurance, Medicare, or Medicaid. It can guard your savings accounts from becoming depleted by increasing healthcare expenses, and premiums may be tax deductible. LTC insurance can also eliminate the burden on family members who would be providing this care. An elder care and estate planning attorney can help with strategies to help fund this care. Government programs like Medicare and Medicaid should be explored—as well as any veteran’s benefits and Social Security. In light of the expense of nursing home care and Medicaid eligibility requirements, elder law attorneys can discuss spending down assets to qualify for Medicaid. Reference: Huffington Post (June 8, 2016) “What is Long Term Care?” #PayingforaNursingHome #MedicaidPlanningLawyer #VABenefits #MedicaidNursingHomePlanning #ElderLaw #LongTermCarePlanning

Bloomberg BNA’s recent article, “Future of Popular Estate-Planning Tool May Hinge on Election,” discusses the grantor retained annuity trust (GRAT), which has been successfully used by several of the wealthiest people in America. With a GRAT, assets that are expected to appreciate are transferred to the trust for a retained annuity plus interest to the grantor over the term of arrangement. When the trust expires, any remaining assets left after the annuity is paid are given to the beneficiaries tax-free. For transfer tax valuation purposes, the value of the taxable gift is the fair market value of the property transferred with the value of the grantor’s retained annuity interest subtracted. President Obama has been pushing to modify the transfer tax rules for GRATs in his annual budget proposals since 2010. Earlier proposals called for requiring a minimum term for GRATs, but the most recent proposals have included additional changes. If Democratic front-runner Hillary Clinton wins, experts think many of her policies will be in line with the Obama administration, like the estate tax. Clinton says she wants to restore the parameters that were in place in 2009, which would reduce the tax exemption threshold for estates to $3.5 million and $7 million for a married couple. There would be no adjustment for future inflation, and the top tax rate would be increased from 40% today to 45%. A Clinton administration may advocate for limiting GRATs. But unless there’s a Democratic-controlled Congress, those changes won’t occur. If presumptive Republican presidential nominee Donald Trump wins the election, the proposals on GRATs would go away because Trump’s tax plan would repeal the estate tax and remove restrictions on GRATs. In addition to the recent budget proposals, rising interest rates could also affect the viability of GRATs in the long term. With lower interest rates, the property transferred to the GRAT doesn’t have to appreciate as much as it would with higher interest rates for the GRAT to be a successful method of transferring wealth to remainder beneficiaries. In a grantor retained annuity trust, if the assets produce a return in excess of the tax code Section 7520 rate, the increase in value above the rate is the responsibility of the beneficiaries. The IRS defines the Section 7520 interest rate as 120% of the applicable federal midterm rate, compounded annually. Typically, as interest rates increase, the ability to effectively execute a successful GRAT decreases. That’s because the Section 7520 rate that the investments need to exceed is greater. Over time, when interest rates go up to 2 to 4%, it’ll eventually diminish the effectiveness of the GRAT. GRATs are sophisticated estate planning tools. Be sure to secure the help of an experienced estate planning attorney to determine if this is right for your situation. Reference: Bloomberg BNA (May 31, 2016) “Future of Popular Estate-Planning Tool May Hinge on Election” #AssetProtection #EstateTax #GRAT #TaxPlanning #estateplanning

Estate planning lets you determine how you want your assets distributed upon your death. Not to be morbid, but for those under 40, be advised that dying doesn’t just happen to old people. In many instances, young people believe that’s the case, which is an impediment to getting this last piece of the financial plan completed. As noted in the CBS Boston article, titled “The Boomers’ Kids: Estate Planning,” if you die without a will, your state laws will provide one for you—and it won’t be what you want. The state will dictate the order in which your assets will be distributed. Along the same lines, if you are married with young children and both parents die, then your failure to appoint guardians means the court system will decide this for you. Your estate plan doesn’t need to be fancy, expensive, or complicated. You begin with a will through which you designate an executor/executrix to carry out your wishes and distribute your assets. Again, if you have minor children, you can name a guardian for them. However, appointing a guardian can be done less formally in some states. Speak with the people you are considering to raise your children. Ask them if they are comfortable with that responsibility. Make certain you understand their values and their patience level. A durable power of attorney is also needed while you’re still alive. This document lets you appoint someone to act on your behalf legally and financially if you’re not able to do so. A health care proxy allows you to choose someone to make medical decisions for you if you are unable to make them. Like those you ask to be your children’s guardians, talk to the individual you’ve asked to be your proxy. Tell them how you feel about death, dying, and life support. This person will need to be the one to carry out your wishes if you cannot do so for yourself. Reference: CBS Boston (June 3, 2016) “The Boomers’ Kids: Estate Planning” #Guardianship #EstatePlanningLawyer #HealthCareProxy #PowerofAttorney #Wills

A recent New Jersey 105.com article explains that the executor’s role is very significant and has considerable responsibility. The article is entitled “What if you don’t want to serve as executor?” If you are chosen to be an executor, think about why you were chosen. Your friend or loved one may see you as the person in his or her life who’s most qualified to handle the various tasks and responsibilities associated with the role. In addition, there may be no one else to whom he or she can turn. This person may not feel he or she has a good second option to serve as the executor. Think carefully before telling someone that you won’t serve as the executor of his or her estate: confidence in the person selected as executor is a critical part of realizing the peace of mind that comes with a well-planned estate. In addition, the executor’s day-to-day responsibilities are in many instances shared or delegated to an estate planning attorney hired by the executor to help with the administration of the estate. The attorney and his or her staff can deal with many of the more time-consuming and difficult tasks in settling an estate. Nonetheless, the executor is still responsible for the oversight of all aspects of the administration. This includes collecting, maintaining, and valuing assets; paying debts and expenses of the estate; filing estate and income tax returns; and distributing the assets per the directions in the will. The executor’s task may be very difficult if the estate has tough issues to address, such as insolvency, unpaid taxes, or real property disputes. However, if the estate is fairly simple as far as its assets and issues, the executor’s job could be a breeze. An individual is free to decline or renounce an appointment after the testator’s death, so a decision doesn’t have to be made right away. Reference: New Jersey 105.com (June 6, 2016) “What if you don’t want to serve as executor?” #EstatePlanningLawyer #Executor #Probate #Wills

Members of the military have special estate planning needs, particularly when they’re deployed. These families also have access to special benefits and resources, says Kiplinger’s May 27, 2016 article, “Estate Planning for Military Families.” Here’s a rundown: Sign up for low-cost life insurance. This is critical if you have financial dependents—even more so if you’re heading into combat. Active-duty members of the military can purchase low-cost term life insurance, called Servicemembers’ Group Life Insurance (SGLI). It costs just 7 cents per $1,000 of coverage per month—or $336 a year for the maximum $400,000—regardless of your age, health, or likelihood of being deployed. In addition, service members can also purchase $100,000 in coverage for their spouse for $60 a year if the spouse is under age 35. The coverage will cost more for older spouses. Have your legal documents organized. You should create the legal documents such as a will (in which you’ll designate a guardian for your minor children), a power of attorney, and a health-care proxy. The power of attorney can be used while you’re deployed. It gives your spouse or another person you choose the authority to handle your affairs while you’re on duty or out of the country. Update beneficiary information. The beneficiary designations for your pension, life insurance, IRAs, and thrift savings plan take precedence over your will. Remember, if you designated a beneficiary when you first joined the service and haven’t changed it since you got married, that original beneficiary could inherit your account. Update those designations with your spouse and review them when you have life changes like marriage, divorce, or the birth or adoption of a child. Make survivor decisions for your military pension. If you qualify for a military pension, you’ll need to think about whether to have your military retirement pay continue for your beneficiary after you pass away. You typically will pay 6.5% of the portion of the monthly pension payout you want your beneficiary to receive, which is deducted pretax from your retirement pay. If you’re looking at this cost compared to the price of buying life insurance for your spouse, the policy would need to be permanent rather than term to be certain it would still be in effect when you die. Utilize survivor benefits. One often overlooked benefit is the ability to roll over a military death gratuity or SGLI death benefit into an IRA even if it is greater than the $5,500 annual limit. While there are some restrictions, this and other rules can prove helpful to military families. Reference: Kiplinger’s (May 27, 2016) “Estate Planning for Military Families” #Guardianship #PowerofAttorney #Wills #MilitaryBenefits #estateplanning