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“You should steer clear of ‘living trust mills,’ which hold themselves out as estate planning specialists but churn out boilerplate documents for a high fee, all to get their foot in the door to sell you annuities or insurance products later on that might not be suitable for your needs,” Swanson wrote on her website. Consumer News reports in “Consumers cautioned about ‘living trust mills'” that the AG says people pushing living trusts are often nothing more than insurance agents or people working for insurance agents. These guys may charge you a lot of money for a boilerplate trust, but they really want to make a bigger sale later, says the AG. A living trust is a legitimate estate planning tool, and—similar to a will—it is created when you are still alive. A living trust lets you transfer assets to the trust and, if done properly, may transfer those assets to heirs without probate. A living trust is revocable, which makes it very flexible. You, or someone you designate, manages the assets in the trust, which can be bought or sold but always have to stay in the name of the trust. Living trusts are very complex legal documents—one-size-fits-all doesn’t work. To set up a living trust, the Attorney General advises families to work with an experienced estate planning attorney. But that’s not how many folks get sucked into the mill process. These outfits will offer a free dinner to hear a presentation where the so-called expert scares the attendees with horror stories of the consequences of dying without a living trust. The AG says this expert will attempt to then schedule in-home appointments with audience members, during which he or she will gather extensive financial information about potential clients and try to earn their trust. The result may be attempting to sell an overpriced living trust, but the big push is to sell an annuity or insurance policy. “Annuities are complex products,” Swanson says. “If you move your money from another product, you may have to pay fees or penalties. Some long-term annuities may lock up your money for more than ten years, subjecting you to penalties if you need to access your money for living expenses.” Annuities can also have complicated interest-crediting provisions, which can be very confusing. Best advice: avoid living trust mills and anyone who uses high pressure sales tactics, including fear, to get you to use any legal document or financial product that you don’t understand. A qualified estate planning attorney will be able to discuss whether or not a living trust is suitable for your family. Reference: Consumer News (April 22, 2016) “Consumers cautioned about ‘living trust mills'” #AssetProtection #EstatePlanningLawyer #LifeInsurance #LivingTrust #Annuity

Analyze your tax refund as a hierarchy of needs. Take a look at your circumstances and see if there are any gaps that need correcting. Are you saving the appropriate amount for your age? Do you have adequate insurance protection? Use your tax refund to cover any shortcomings. Consider the return on investment (ROI). If you see that all of your financial bases are covered and you want to go ahead and spend the refund, be certain you’re receiving a good return on investment with that purchase. Spending the money on an experience with the whole family is money well spent. Modify your W4. Adjust how much money is withheld from your paycheck on your W4 form by changing the number of deductions. If you get a big refund every April, you might want to up the number of your deductions. This withholds less out of your paycheck, and you’ll have more money for monthly expenses. Plan ahead. One way to be assured that you make your tax refund count for the next year is to look ahead and consider any major life changes that may be in the foreseeable future. Planning for deductions helps you understand how much you should withhold and where you should be allocating funds. Meet with an expert. After you get your tax refund, talk with your financial planning team to establish priorities. Make the necessary adjustments to ensure the money will be put to good use throughout this year and place you in a good position for success for the next tax year. Have a realistic mindset concerning what your tax refund is and from where it’s coming because this could influence the way it’s spent or used. Remember, your tax refund is your money—money for which you’ve worked hard. It deserves mindful financial planning. Reference: Virginia Business (April 14, 2016) “How to maximize your tax refund” #AssetProtection #estateplanning #PlanningfortheFuture #TaxPlanning

When do you want to pay taxes? True, no one really wants to pay taxes; however, when you are saving for retirement, you get to make a choice. This is the most significant difference between the two main types of IRAs. You may be able to qualify for a tax deduction for your contributions with a traditional IRA, but when you do withdraw the money in retirement, it’s taxed as ordinary income. However, Roth IRA contributions aren’t deductible on your current tax return, but withdrawals after you retire are going to be tax-free. So, ask yourself when you’d like your tax break—now or later? Will you need the money soon after you retire? With pre-tax retirement plans such as the traditional IRA or many of the employer-sponsored retirement plans, you must begin taking distributions after age 70½. Once you reach that age, you’ll have to withdraw a certain percentage of your account’s value every year, based on IRS life expectancy tables. However, a Roth IRA doesn’t have this requirement. You can leave the money in the account alone as long as you like. If you don’t need to use it until you’re 75, 80, or even 90, that’s OK. Because of this, Roth are thought to be the best option for estate planning. Do you want early access to the money? With either IRA, making an “unqualified” withdrawal means a 10% penalty. There are certain exceptions, like the ability to use IRA funds for college without a penalty at any time. Roth IRAs also let you withdraw your original contributions—but not investment profits—for any time and for any reason. Because of this, a Roth IRA can be both a retirement account and an emergency fund. Do you want to be able to contribute after you retire? Roth IRAs don’t have an upper age limit for contributions, and you can contribute as long as you have earned income—no matter how old you are. With both account types, there’s no lower age limit—provided the earned income requirement is satisfied. Do you want to leave some of your retirement savings to your heirs? Roth IRAs are super tools for estate planning. Since you’ve already paid taxes on your contributions, the money in your account can be left to your heirs tax-free. These are some of the considerations when deciding which IRA is the best for your retirement. But there’s no best option for everyone. It depends on which features appeal to you the most. Reference: The Motley Fool (April 17, 2016) “8-Point Checklist for Choosing a Retirement Plan” #AssetProtection #IRAs #401k #Inheritance #TaxPlanning #estateplanning

When a spouse dies, the surviving spouse may feel some sort of real or perceived threat from their step-children over their inheritance. Solid estate planning can decrease or even eliminate the potential for this type of problem. Strategies include planning methods such as using a revocable living trust rather than a will. A trust can be preferable when trying to protect your second spouse’s inheritance because it’s much harder for an unhappy step-kid to break a living trust. It’s typically created way in advance of death or disability. Wills are in many instances signed at the last minute in hospital rooms or nursing homes. These scenarios can raise suspicion of undue influence from family members and lead to a challenge. In addition, it’s more effective to disinherit an estranged child using a living trust. Only beneficiaries of the trust have a legal right to set aside its provisions—a disinherited child isn’t a beneficiary. But with a will, anyone in the family can contest its terms. The trust can eliminate the possibility for a lawsuit. A living trust can also be better than a will because its assets will flow privately to the surviving family after the first spouse dies—they don’t go through probate. Wills are required to go through probate. That is the only place they have any sway. Probate delays the distribution of assets in a will, and it’s a public process. This makes it easier for an estranged step-child or one of the children from the deceased spouse’s prior marriage to find out who’s getting what, which might motivate the kid to contest the will. Whether you use a living trust or a will to distribute your assets after your passing, you can also add language to either document to decrease potential for of a contest. You can include a No Contest Clause, which stipulates that if somebody files a lawsuit in an attempt to litigate your estate plan, that person will get nothing. You can also give your surviving spouse a “limited power of appointment,” which lets him or her cut an estranged child out of your plan—even if there’s no legal challenge. It could be used in the event a child just tries to harass or intimidate the surviving spouse or other family members. An online will or trust won’t cut it with all of the issues involved with a blended family. You need the help of a qualified estate attorney. Reference: credit.com (April 14, 2016) “How to Keep Your Kids From Fighting Over Their Step-Parent’s Inheritance” #AssetProtection #LimitedPowerofAppointment #Probate #Inheritance #NoContestClause #RevocableLivingTrust #BlendedFamilies #WillContest #Wills #estateplanning

The Business Journal reports in “Taxes done? Not so fast… Here are 3 things to think about” that there are several things to think about in terms of how you’re managing your wealth for the long term before you blot taxes from your consciousness. Active engagement with your money can make a real difference when it comes to achieving your financial goals. Rather than selective amnesia with tax season, try some financial awareness throughout the year because tax season provides a great opportunity for people to think more holistically about wealth management and financial planning. With the return freshly filed, all your financial information is right in front of you. It’s a great time to review and update financial goals, as well as your plan on how to achieve them. Retirement Savings Plan. Review your retirement savings plan to be certain you’re on track for your goals and to check that you’re contributing enough to get the maximum benefit if you have an IRA or 401(k). Charitable Giving. Examine your charitable giving plan to determine whether you should up your donations to ease tax burdens. Estate Planning. Look at your estate plan and make sure it’s current. According to a recent survey, just 19% of investors take the opportunity to develop or assess their estate plans when reviewing tax documents—even though this is a vital part of a holistic financial plan. While many people are on the right track when it comes to their financial plan, there’s always room for improvement. Before you put everything back in the file cabinet, take time to think about your financial situation, goals, and a strategy to get there. Reference: The Business Journal (April 18, 2016) “Taxes done? Not so fast… Here are 3 things to think about” #AssetProtection #IRAs #CharitableGiving #TaxPlanning #RetirementPlanning #estateplanning

Prior to receiving any benefits from Medicaid, individuals must “spend down” their cash assets to below $2,000. Some property is termed by Medicaid officials as “exempt” property—to include one vehicle, limited life insurance, a home, a funeral plan and personal property. While such property doesn’t have to be spent down, that’s very misleading. You see, those limited assets may be exempt for qualifying for Medicaid, but they’re not exempt after the person dies. They’re subject to what’s called “estate recovery.” Estate recovery is the process that allows Medicaid to recover the amounts it paid on a person’s behalf from that person’s estate. Kansas’ Estate Recovery is a “privatized” agency which can seek repayment of Medicaid benefits against the “estate” of a deceased Medicaid recipient or—as described above—against the estate of a spouse. Kansas has what is call expanded estate recovery. Usually when someone dies, the person’s family may need to initiate probate. When the deceased had all of the property in joint tenancy with a spouse, probate isn’t needed. However, if a piece of property isn’t held in joint tenancy or is not otherwise automatically conveyed to a third person upon the death of the owner, then only that property will have to be probated. These items typically don’t have to be probated: joint tenancy property property with a transfer-on-death or pay-on-death provision life insurance with named beneficiaries life estates But Estate Recovery in Kansas allows an agency to bring in all of the property that an individual may have any interest in at the time of death—even though that property would ordinarily not have to go through the probate process. Hence, contrary to standard probate law, the estate can consist of joint tenancy property, property with transfer-on-death or pay-on-death provisions, life insurance payable to a third party, and life estates. It can also include property that was transferred away within one year of death. So you see that Estate Recovery has a much broader definition of what property can be included in an estate than any other creditor in the Jayhawk State. Talk to a qualified elder law attorney who is familiar with how to plan for the possibility of estate recovery. Reference: The Hays (KS) Daily News (April 12, 2016) “Estate recovery — an unexpected surprise” #AssetProtection #MedicaidTrustPlanning #MedicaidPlanning #MedicaidPlanningLawyer #Probate #MedicaidNursingHomePlanning #ElderLaw #estateplanning

IRAs and see-through trust status. How the trust will get taxed as an IRA beneficiary is the big issue in the set-up. Usually, trusts aren’t eligible to leverage stretch-IRA provisions. This lets some beneficiaries take small distributions throughout their lifetimes. Trusts would instead have to take out all IRA money within the first five years, which would accelerate taxation and potentially create a larger tax bill. To receive preferential tax treatment for an IRA beneficiary trust, if the trust qualifies for see-through status, the rules governing inherited IRA distributions will disregard the trust as a separate entity. Instead, it will use the life expectancy of the trust’s beneficiary to calculate minimum required distributions. It’s a big incentive to structure the trust the right way to qualify for see-through treatment. Requirements for a see-through IRA beneficiary trust. To be treated as a see-through trust, a trust must be irrevocable as of the date of death of the owner of the IRA. And the trust has to be validly formed under appropriate state law. But the toughest part is identifying the trust’s beneficiaries. The IRS must be able to determine exactly the beneficiaries of the trust. Then it can assess whether those individuals are able to be designated beneficiaries who can qualify for preferential tax status. Just one beneficiary who can’t be ascertained as a designated beneficiary can disqualify the entire trust, so there can be no mistakes about beneficiaries when creating this trust. If there are multiple beneficiaries, the oldest one’s life expectancy will be used to determine required minimum distributions. The financial institution that’s acting as custodian of the inherited IRA must also receive a copy of appropriate documentation of the trust arrangement and the designated beneficiaries. This has to be done by October 31st of the year following the year of the original IRA owner’s death. Although using a trust as an IRA beneficiary makes estate planning a bit more complicated, it gives you some added protection. Follow the rules to avoid an unintended bad tax result. Reference: Motley Fool (April 2, 2016) “Can an IRA Go Into an Irrevocable Trust?” #AssetProtection #IRAs #IrrevocableTrust #Inheritance #Beneficiaries #HoustonEstatePlanningLawyer #TaxPlanning #estateplanning

The debate between privacy and access happens when deciding what to do with a deceased’s digital property or records. “For the last few years, there’s been kind of this war going on,” said a lobbyist who testified before a House committee reviewing the legislation on behalf of the Elder Law and Disability Rights section of the State Bar of Michigan. He said that estate lawyers want to make it less difficult for those appointed to manage someone’s property after they die or become incapacitated to be able to access all those memories, including emails and photos stored online. However, companies have privacy standards and internal policies. “It wasn’t easy. This has been worked on for a couple years,” said Republican Rep. Anthony Forlini, of Harrison Township. “This is gonna affect most people’s lives more than just about anything we’ve done, and most people don’t understand that.” The Michigan law is based on the Uniform Law Commission model legislation. This model law was endorsed by Google, Facebook, the National Academy of Elder Law Attorneys (NAELA), the Center for Democracy and Technology and the Association of American Retired Persons (AARP). A Google spokesperson said in an email to The Associated Press that the company believes that bills like the Uniform Law Commission’s model bill and Michigan’s new law “strike the right balance between the needs of the executor and the privacy expectations of the user.” Several states have enacted versions of the model legislation, and 20 others have introduced some form of the legislation this year. Reference: The News & Observer (April 3, 2016) “New law lets some access Facebook, email of the dead” #DigitalAssets #estateplanning #PowerofAttorney

“We’re honored to be selected as one of the regional task forces,” Acting U.S. Attorney Benjamin C. Glassman said. “Our designation highlights the great, collaborative work already underway here with local, state, and federal partners, and our District’s commitment to protecting our most vulnerable citizens.” These Elder Justice Task Forces include representatives from the U.S. Attorneys’ Offices, state Medicaid Fraud Control Units, state and local prosecutors’ offices, the Department of Health and Human Services, Ohio Adult Protective Services, a Long-Term Care Ombudsman, and law enforcement. Along with the Southern District of Ohio, the Elder Justice Task Forces will be launched in Northern California, Georgia, Kansas, Western Kentucky, Northern Iowa, Maryland, Eastern Pennsylvania, Middle Tennessee, and Western Washington. In Ohio, the Office of the State Long-Term Care Ombudsman works in cooperation with regulatory agencies and the Ohio Attorney General’s Office. They’ve done so for several years. The goal is that this collaboration will have a positive impact on improving quality for residents who call the facilities “home.” While millions of seniors rely on nursing homes to give them quality care and to treat them with dignity and respect when they’re most vulnerable, the Acting Associate Attorney General said that all too often nursing homes place their own economic gain ahead of the needs of their residents. The task forces will make certain the elderly are protected. The Elder Justice Task Forces are part of the larger strategy and commitment to protecting seniors, and is in the Elder Justice Initiative. The Elder Justice Initiative plays an important role in the investigative and enforcement of nursing homes and other long-term care entities that provide grossly substandard care to Medicare and Medicaid beneficiaries. Reference: Portsmouth Daily Times (April 3, 2016) “Southern Ohio gets elder justice task force” #ElderAbuse #ElderLaw

Both are welcome developments says The Las Vegas Review-Journal in a recent article, “Elder abuse.” These actions are in part in response to a Review-Journal series revealing dysfunction in Clark County’s guardianship system, a system that was supposed to safeguard the assets of senior citizens whom courts have determined to be incapacitated. In some instances, those appointed to look after the financial assets of the infirm or incapacitated took advantage of them and raided their bank accounts, sold their property, and drained the resources of the person they were supposed to be helping. The attorney general said that he will appoint a fraud investigator in his office to work with local law enforcement agencies on elder exploitation—which is intended to get police and prosecutors to take these cases more seriously. The commission heard from District Court Judge Cynthia Dianne Steele, who said that about half of the 3,800 cases currently in the system were out of compliance with state law. Many lacked an initial inventory of assets, which makes it impossible to determine if there are predator issues, or they were missing annual reports, which are required by the state. Judge Steele said that new software will flag files that lack the necessary paperwork. The judge also informed the panel that 85% of seniors in the Clark County guardianship program were not represented by an attorney during the process. Incapacitated seniors must have an attorney to discourage illegal activity and increase the odds that any suspicious actions be revealed. Reference: Las Vegas Review-Journal (April 4, 2016) “Elder abuse” #ElderAbuse #ElderLaw

One of the cool things about 529 plans is that you can change the beneficiary to another qualifying family member without tax consequences. When you are selecting a beneficiary, avoid skipping generations. If you do not, you may trigger a tax penalty. Remember, you don’t have to use these funds immediately, so if your kids think that they might want to pursue a graduate degree or other professional program later on, you can save the funds and use them in the future. Parents who are interested in continuing their own education can make themselves the beneficiary. Another benefit of 529 plans is that there is no time limit on when you must spend the savings, which gives you the opportunity to leave any unused money as an educational legacy to your grandchildren. In addition, your estate planning attorney may suggest that you one day use a 529 plan as an estate-planning tool. 529 plans offer a unique opportunity: the value is removed from your taxable estate, but you are still able to retain control of the account. Talk to your attorney to learn more. Contributions are treated as gifts for tax purposes, so if you go ahead and withdraw the funds for non-qualified expenses, you can take a non-qualified withdrawal. Your contributions were made with after-tax dollars, so they will not be taxed or penalized. But earnings on your investments are be subject to income tax as well and a 10% penalty. You cannot take a principal-only withdrawal from your 529 plan. Every withdrawal is part contribution and part earnings; if there are gains in the account, you are going to pay taxes and a penalty on every non-qualified distribution. Reference: New Jersey 101.5 (March 29, 2016) “Options for extra 529 college savings” #529EducationSavingsPlans #AssetProtection

Don’t Panic! An important lesson of the devastating 2007-09 downturn is that even in the worst of times, recoveries can occur in a reasonable period. Since 1945, it has taken about four months to recover from market declines of 10% to 20%. Stay the course. Monitor Your Portfolio. Retirees need an investment horizon long enough to withstand this storm or whatever the market has in store. For a retirement that can last decades, new retirees should have 40% to 60% of their assets in stocks. Stocks are better with inflation—better than bonds and cash over time, so even 90-year-olds should keep at least 20% of their assets in stocks. You should have been cutting back on stocks periodically over the past few years, and it’s a good time to review your investment mix to see if it’s consistent with your tolerance for risk. Diversify. Investors should own a mix of domestic and foreign bonds and U.S. and international stocks. Your stock allocation should have a variety of market sectors, with no one sector having more than 5% to 10% of your holdings. Stick With High-Quality Holdings. This is no time to get risky, so stick with companies with dependable earnings, healthy balance sheets, and substantial dividends, or funds that invest in such companies. Tap Your Cash Bucket. Instead of dumping stocks, use Social Security and any annuities, plus the portion of your portfolio that is in cash and short-term CDs to pay your expenses. If you have planned for the inevitable downturns, you should have enough in cash and cash-like investments to cover two to three years of living expenses. Rethink Your Withdrawal Strategy. The key is to be flexible, and if you don’t have other income to offset lower withdrawals, you should think about deferring gifts and discretionary expenditures until the market stabilizes. Also note that spending changes (and typically declines) in retirement, which may make it easier to cut back. Postpone Retirement. This may sound drastic, but delaying retirement can really improve retirement success. This provides more time to save, including making catch-up contributions to retirement accounts, plus allows money in your accounts to grow. You’ll also have fewer years during which you must rely on savings once you do retire. Working longer can really ease strain on your portfolio. Reference:  Kiplinger’s (March 2016) “How to Retire During a Volatile Stock Market” #AssetProtection #HoustonRetirementPlanning #TaxPlanning