Estate Planning

Serving Southwest Florida

Helping clients plan for their family's future, by creating an efficient, thoughtful and comprehensive estate plan that preserves their legacy and gives them peace of mind.

Estate Planning After Retirement

How you handle money and legal matters during retirement is more important than during your working years. It’s harder to bounce back from financial setbacks when you aren’t getting a regular paycheck. Managing finances and legal affairs to keep your savings intact and keeping your estate planning after retirement current is part of your new responsibility as a retiree, says a recent article “7 Money Moves You Should Make After Retiring” from MoneyTalksNews.

  1. Review estate planning documents. One of the most important documents is your will, but you also need to review any power of attorney and trust documents. A will is used to specify what you want done with your property after you die. What happens if you die without a will? The state will step in and make those decisions for you.

If you marry, divorce, inherit or buy property, you should update your will to reflect your changed circumstances. The arrival of a new grandchild may make you want to change your beneficiaries.

Reviewing your estate planning after retirement and then periodically afterwards can put your mind at ease. If you don’t have a will or trust, now is the time to have one created with an experienced estate planning attorney. You may also need a living will, power of attorney and letter of intent.

  1. Review named beneficiaries. Beneficiary designations require updating anytime there is a change in your life.  They play a large role in your estate planning after retirement. When you purchase life insurance, enroll in a pension plan or open an individual retirement account, you are often asked to name a beneficiary–the person who will inherit the proceeds when you die. These instructions take precedence over instructions in a will.
  2. Prepare for your funeral. No one wants to consider their own mortality, but helping your loved ones be financially prepared for your funeral is a gift. By planning your own funeral, including making arrangements for funds to be available to pay for it, you save your family of the burden of having to plan and pay for a funeral while they are grieving your loss. Planning in advance also gives you an opportunity to decide what type of funeral you want.
  3. Consider trimming transportation costs. If your household has two cars, but you could manage with one, consider paring down this expense. Seniors tend to pay higher rates than young people, so this is one way to trim your monthly expenses.
  4. Review emergency fund status. Having money set aside for unexpected expenses is more important now than when you were working. An emergency fund can help you avoid taking money out of retirement accounts, which costs you not only the funds themselves, but the potential growth of the funds and any taxes that might be due on withdrawals.
  5. Plan for Required Minimum Distributions (RMDs) and taxes. Once you celebrate your 72nd birthday, you’ll need to start taking RMDs from tax-deferred retirement accounts. If you miss an RMD deadline or don’t take out enough, you may have to pay a 50% tax penalty on the amount of money you did not withdraw. RMDs are treated as taxable income, so they may impact your federal income tax rate, as well as the “combined income” formula used to determine the extent to which your Social Security benefits are taxable.
  6. Do you still need life insurance? If your family is not dependent upon your income, now might be the time to drop life insurance policies. The main purpose of life insurance is to provide an income stream for loved ones, if you should die unexpectedly when you are working and raising a family. However, if you are retired, your children are grown and your spouse is not relying on your income, it may be time to let the policies lapse. On the other hand, if you can afford the premiums and wish to leave the proceeds to a spouse or your children, by all means keep the policy. However, check the beneficiary designation.

Let us help you with your estate planning after retirement.

Reference: MoneyTalksNews (Oct. 9, 2020) “7 Money Moves You Should Make After Retiring”

 

Second Marriages

It takes a certain kind of courage to embark on second, third or even fourth marriages, even when there are no children from prior marriages. Regardless of how many times you walk down the aisle, the recent article “Establishing assets, goals when planning for a second marriage” from the Times Herald-Record advises couples to take care of the business side of their lives before saying “I do” again.

Full disclosure of each other’s assets, overall estate planning goals and plans for protecting assets from the cost of long-term care should happen before getting married. The discussion may not be easy, but it’s necessary: are they leaving assets to each other, or to children from a prior marriage? What if one wants to leave a substantial portion of their wealth to a charitable organization?

Florida law has provisions designed to protect a surviving spouse (including a second spouse) which override the terms of a person’s estate planning documents. The Elective Share guarantees a surviving spouse 30% of the deceased spouse’s estate.  The Florida Constitution and Statutes give a surviving spouse rights to the decedent’s homestead that overrule the terms of the decedent’s will or trust. If you are in a second marriage and wish to protect your children’s inheritance, you must address these laws in your estate planning documents.

The first step recommended with remarriage is a prenuptial agreement (prenup), a contract that the couple signs before getting married, to clarify what happens if they should divorce and what happens on death. The prenup typically lists all of each spouses’ assets and often a “Waiver of the Right of Election,” meaning they willingly give up any inheritance rights.

If it’s too late to have a prenup, they can use a Postnuptial Agreement (postnup). This document has the same intent and provisions as a prenup but is signed after they are legally wed. Over time, spouses may decide to leave assets to each other through trusts, owning assets together or naming each other as beneficiaries on various assets, including life insurance or investment accounts.

In a second marriage without a pre-or postnup, unintended assets will go to the surviving spouse upon death, with little or possibly nothing going to the children.

The couple should also talk about long-term care costs, which can decimate a family’s finances. Plan A is to have long-term care insurance. If either of the spouses has not secured this insurance and cannot get a policy, an alternate is to have their estate planning attorney create a Medicaid Asset Protection Trust (MAPT). Once assets have been inside the trust for five years for nursing home costs and two-and-a-half years for home care paid by Medicaid, they are protected from long-term care costs.

When applying for Medicaid, the assets of both spouses are at risk, regardless of pre- or postnup documents.

Discuss the use of trusts with your estate planning attorney. A will conveys property, but assets must go through probate, which can be costly, time-consuming and leave your assets open to court battles between heirs. Trusts avoid probate, maintain privacy and deflect family squabbles.

Creating a trust and placing the joint home and any assets, including cash and investments, inside the trust is a common estate planning strategy. When the first spouse dies, a co-trustee who serves with the surviving spouse can prevent the surviving spouse from changing the trust and by doing so, protect the children’s inheritance. Let’s say one of the couple suffers from dementia, remarries or is influenced by others—a new will could leave the children of the deceased spouse with nothing.

Many things can very easily go wrong in second marriages. Prior planning with an experienced estate planning attorney can protect the couple and their children and provide peace of mind for all concerned.

Let us help you plan.

Reference: Times Herald-Record (Sep. 21, 2020) “Establishing assets, goals when planning for a second marriage”

Choosing an Estate Planning Attorney

This post gives you tips in choosing an estate planning attorney. It’s critical to understand what will happen to your estate after your death. That’s where the help of an experienced estate planning attorney comes in, says VENTS Magazine’s recent article entitled “What Does an Estate Lawyer Do Exactly?”

An experienced estate planning attorney is a legal professional, upon whom you can rely to help protect your estate after your death or in the event that you become incapacitated.

He or she will make certain that your assets and property are handled correctly.

In addition to assisting you with your estate, an estate planning attorney can help handle any family members trying to get involved in your legal affairs.

It may be difficult to please everyone when creating your will. Choosing an estate planning attorney will help you make the best decisions when it comes to distributing your wealth.

Estate planning is critical—especially if you’re older, experiencing chronic illness, or just want to be smart about protecting your assets.

As we grow older, we can accumulate a long list of stressful issues and responsibilities. You may worry that your estate will be gobbled up by creditors once you pass away, or that your children will fail to distribute your assets as you intended.

Much of this stress is eliminated with the guidance and counsel of an experienced estate planning attorney. Having an estate plan allows you to enjoy a better quality of life, once you’re older. You won’t have to live every day with worry or stress about the future after you’re gone.

An experienced estate planning attorney is a valuable resource for your family, in the event someone tries to contest the will after your death.

Choosing an estate planning attorney who can also aid in distributing the wealth, protecting your property from creditors and lowering estate taxes.

Contact us and let us be your estate planning attorney.

Reference: VENTS Magazine (Sep. 28, 2020) “What Does an Estate Lawyer Do Exactly?”

 

Five Ways to Protect Your Estate

One of the prime goals of estate planning is to protect your estate.  It is true that a single person who dies in 2020 could have up to $11.58 million in personal assets and their heirs would not have to pay any federal estate tax. However, that doesn’t mean that regular people don’t need to worry about estate taxes—their heirs might have to pay state estate taxes, inheritance taxes or the estate may shrink because of other tax issues. That’s why U.S. News & World Report’s recent article “5 Estate Planning Tips to Keep Your Money in the Family” is worth reading.

Without proper planning, any number of factors could take a bite out of your children’s inheritance. They may be responsible for paying federal income taxes on retirement accounts, for instance. You want to be sure that a lifetime of hard work and savings doesn’t end up going to the wrong people.

The best way to protect your estate, your family and your legacy, is by meeting with an estate planning attorney and sorting through all of the complex issues of estate planning. Here are five areas you definitely need to address:

  1. Creating a last will and testament
  2. Checking that beneficiaries are correct
  3. Creating a trust
  4. Converting traditional IRA accounts to Roth accounts
  5. Giving assets while you are living

A last will and testament. Only 32% of Americans have a will, according to a survey that asked 2,400 Americans that question. Of those who don’t have a will, 30% says they don’t think they have enough assets to warrant having a will. However, not having a will means that your entire estate goes through probate, which could become very expensive for your heirs. Having no will also makes it more likely that your family will challenge the distribution of assets. As a result, someone you may have never met could inherit your money and your home. It happens more often than you can imagine.

Checking beneficiaries. Once you die, beneficiaries cannot be changed. That could mean an ex-spouse gets the proceeds of your life insurance policy, retirement funds or any other account that has a named beneficiary. Over time, relationships change—make sure to check the beneficiaries named on any of your documents to ensure that your wishes are fulfilled. Your will does not control this distribution and is superseded by the named beneficiaries.

Set up a trust. Trusts are used to accomplish different goals. If a child is unable to manage money, for instance, a trust can be created, a trustee named and the account funded. The trust will include specific directions as to when the child receives funds or if any benchmarks need to be met, like completing college or staying sober. With an irrevocable trust, the money is taken out of your estate and cannot be subject to estate taxes. Money in a trust does not pass through probate, which is another benefit of protecting your estate.

Convert traditional IRAs to Roth retirement accounts. When children inherit traditional IRAs, they come with many restrictions and heirs get the income tax liability of the IRA. Regular income tax must be paid on all distributions, and the account has to be emptied within ten years of the owner’s death, with limited exceptions. If the account balance is large, it could be consumed by taxes. By gradually converting traditional retirement accounts to Roth accounts, you pay the taxes as the accounts are converted. You want to do this in a controlled fashion, so as not to burden yourself. However, this means your heirs receive the accounts tax-free.

Gift with warm hands, wisely. Perhaps the best way to ensure that money stays in the family, is to give it to heirs while you are living. As of 2020, you may gift up to $15,000 per person, per year in gifts. The money is tax free for recipients. Just be careful when gifting assets that appreciate in value, like stocks or a house. When appreciating assets are inherited, the heirs receive a step-up in basis, meaning that the taxable amount of the assets are adjusted upon death, so some assets should only be passed down after you pass.

Let us help your protect your estate.

Reference: U.S. News & World Report (Sep. 30, 2020) “5 Estate Planning Tips to Keep Your Money in the Family”

Avoiding Probate

Estate planning attorneys are often asked if one of the goals of an estate plan is avoiding probate, regardless of the cost. The answer to that question is no, but a better question is the more even-tempered “Should I try to avoid probate?” In that case, the answer is “It depends.” A closer look at this question is provided in the recent article from The Daily Sentinel, “Estate Planning: Is Probate Something to Avoid at All Costs?”

Probate is not always a nightmare, depending upon where a decedent lived. Probate is a court process conducted by judges, who usually understand the difficulty executors and families are facing, and their support staff who genuinely care about the families involved. This is not everywhere, but your estate planning attorney will know what your local probate court is like. With that in mind, there are certain pitfalls to probate and there are situations where avoiding probate does make sense for your family.

In the case where it makes sense to avoid probate, whatever planning strategy is being used to avoid probate must be carefully evaluated. Does it make sense, or does it create further issues? Here’s an example of how this can backfire. A person provided their estate planning attorney with a copy of an Enhanced Life Estate Deed, which is a deed that transfers property to a designated person (called a “grantee”) immediately upon the death of the person who signed the deed (called a “grantor”).

The deed had been signed and recorded properly with the recorder’s office, just as a typical deed would be during the sale of a home. Note that an Enhanced Life Estate Deed does not transfer the title of ownership, until the grantor dies.

Here’s where things went bad. No one knew about the deed, except for the grantor and the grantee. The remainder of the estate plan did not mention anything about the Enhanced Life Estate Deed. When the grantor died, ownership of the property was transferred to the grantee. However, the will contained conflicting instructions about the property and who was to inherit it.

Instead of avoiding probate, the grantor’s estate was tied up in court for more than a year. The family was torn apart, and the costs to resolve the matter were substantial.

Had the deceased simply relied upon the probate process or coordinated the transfer of ownership with his estate planning attorney, the intended person would have received the property and the family would have been spared the cost and stress. Sticking with the use of a last will and testament and the probate process would have protected everyone involved.

An experienced estate planning attorney can help determine the best approach for the family, with or without probate.  Let us help you plan to avoid probate.

Reference: The Daily Sentinel (Oct. 3, 2020) “Estate Planning: Is Probate Something to Avoid at All Costs?”

 

Planning for Social Security Benefits

Planning for Social Security benefits can save you a lot of money.  You’re entitled to your full monthly Social Security benefit based on your earnings history when you hit your full retirement age (“FRA”).

Your FRA is either 66, 67, or somewhere in between, depending on when you were born. However, you can enroll in Social Security as early as age 62.

However, for each month you claim benefits ahead of FRA, it reduces the amount for the rest of your life.

Motley Fool’s recent article entitled “3 Reasons to Claim Social Security Benefits Early” says it may pay to enroll early, if one of these situations applies to you.

  1. You need cash ASAP. It’s not uncommon for seniors to lose their jobs and have a hard time securing employment again. Others are forced to stop working due to health issues (either theirs or that of a family member).

If you require money immediately, then you might not have the option of weighing whether claiming Social Security early is a good idea. You’ll just have to go ahead to get by.

It’s better to claim your benefits early at a lower rate, than adding costly debt to survive.

  1. Your health is a concern. Social Security is supposed to pay you the same total lifetime benefit. As a result, filing early will give you less money each month, but more years of benefits. This, in effect, simply means stretching that total payout for a longer time period. If you delay, it will have the opposite effect. You get a bigger monthly benefit but over fewer years.

This formula is designed so you break even, if you live an average lifespan. However, if your health isn’t good, and you don’t expect to live all that long, then filing for benefits early could be the right move. This could ensure that Social Security ultimately pays you the largest amount of money.

  1. You want to have fun in retirement, while you’re younger. Filing for benefits before your FRA may let you really enjoy travel and other experiences, while your health permits. However, if you don’t have a lot of retirement savings, you may need to wait on filing for benefits to avoid financial difficulties later on. However, with a good-size nest egg, it pays to claim your money when it will do you the most good.

Take the time to consider your options for claiming your benefits. Planning for Social Security benefits will help you to avoid regretting your choice. Consult with a financial advisor with expertise and experience in retirement planning.  Let us help you plan.

Reference: Motley Fool  (Oct. 6, 2020) “3 Reasons to Claim Social Security Benefits Early”

 

Healthcare in Retirement?

Of the many expenses for retirees, healthcare in retirement can be one of the biggest. There are Medicare premiums and prescription drugs. These healthcare expenses can take up a large part of your retirement savings. Some projections say that the average 65-year-old man today will spend $189,687 on healthcare expenses in retirement, and a typical 65-year-old woman will spend $214,565. These figures don’t include long-term care, such as nursing home expenses.

Motley Fool’s recent entitled “How to Save Money on Healthcare in Retirement” explains that there are steps you can take to decrease your healthcare costs in retirement. Let’s look at a few ways to save money, when you’re limited to a fixed income.

  1. Use Medicare’s free preventive services. Medicare eligibility starts at age 65. Once enrolled, you have access to many no-cost benefits aimed at helping you stay healthy. However, many seniors don’t take advantage of these services and lose an opportunity to get ahead of health issues. Medicare enrollees get a free wellness visit with a doctor every year, and scheduling that could help avoid a separate bill later. Many critical health screenings are also free under Medicare, including mammograms and certain cancer screenings, diabetes testing and depression screenings. Taking advantage of these free services is a great way to keep your health in the best possible shape, which will lower your overall healthcare costs.
  2. Nip health issues in the bud. Small health issues can become big ones, if left unattended. An easy way to save money on healthcare in retirement, is to address medical issues before they get worse.
  3. Look at a Medicare Advantage Plan. One reason why healthcare in retirement is so expensive, is that many essential services aren’t covered under traditional Medicare, like dental care, vision services and hearing aids. If you opt for a Medicare Advantage plan, however, you might save money on these and other critical services. Medicare Advantage typically provides a wider range of benefits, and in some cases, you could wind up paying less for Medicare Advantage than traditional Medicare—with that improved coverage. Medicare Advantage can also save you money, by decreasing your out-of-pocket spending. Most of these plans put a cap on that figure, but traditional Medicare has no limits on your yearly costs.
  4. Compare the Best Prescription Drug Plan. If you take prescription drugs, you need to find a cost-effective plan. If you’re enrolled in traditional Medicare, you’ll need a separate Part D plan to cover your drug costs. However, not all plans are the same. Do some comparison shopping to see which plans offer the best deals, based on the medications you’re taking.
  5. Purchase Long-Term Care Insurance. At least 70% of seniors age 65 and over will require some type of long-term care in their lifetime. That’s why long-term care insurance is needed. The younger you are when you apply, the more likely you’re going to get approved and get the best rates.

Saving money on healthcare in retirement will let your nest egg last longer and buy you more freedom to enjoy your golden years. Learn about healthcare costs, so you’re ready to lower your expenses and avoid the financial stress that so many of today’s seniors face.  Let us help you plan your retirement and estate.

Reference: Motley Fool (May 19, 2020) “How to Save Money on Healthcare in Retirement”

 

Trusts And Life Insurance

A trust is a legal vehicle in which assets are legally titled and held for the benefit of another party, the beneficiary, explains Forbes’ recent article entitled “How To Fund A Trust With Life Insurance.” The article says that trusts are often funded with a life insurance policy. This will provide assets to be used after the death of the insured for the benefit of their family. If you are a parent of minor children, the combination of trusts and life insurance may be the best way to make certain that your children have their financial needs satisfied and also make sure the assets are used in ways you want.

Trusts are either revocable or irrevocable. A revocable living trust is the most frequently used type of trust. It has some major benefits, like the ability to avoid probate, which can be an expensive and lengthy process. Assets in a revocable trust are accessible much more quickly than those left through a will.  Because they’re revocable, the person who creates the trust (the grantor) can also make adjustments to the trust, as their situation changes.

A grantor will fund the trust with assets for the trust beneficiaries. For parents of minor children, life insurance is an inexpensive tactic to make certain that your children are cared for after your death. Typically, each parent buys a life insurance policy, and in a two-parent household, usually each spouse names the other as the primary beneficiary with a revocable living trust as the contingent beneficiary.

If the second parents were to die, the life insurance policies would pay to the trust. The trustee would manage the trust assets for the minor children. Funding a trust with life insurance also benefits heirs, because it provides liquidity right after your death. Other assets like investment accounts and real estate can be very illiquid or have tax consequences. As a result, it can take a while to get to that equity.

On the other hand, term life insurance is a fast and tax-free funding way to build a trust. Purchase a term life policy that will last until your children are adults and out of college. In using life insurance with your children as beneficiaries of the trust, you also have some control over the assets. If you name minor children as beneficiaries on a life insurance policy, they won’t be able to use the money until they are an adult. Some children may also not be financially responsible enough to manage money as young adults in their 20s.

If you already own a life insurance policy and want to create a trust, you can transfer ownership of the policy to the trust. Work with an experienced estate planning attorney.

Reference: Forbes (Sep. 17, 2020) “How To Fund A Trust With Life Insurance”

 

Everyone Needs an Estate Plan

Many people think you have to be a millionaire to need an estate plan and investing in one is too costly for an average American. Not true! People of modest means actually need an estate plan more than the wealthy to protect what they have. A recent article from TAPinto.net explains the basics in “Estate Planning–Getting Your Affairs in Order Does Not Need to be Complicated or Expensive.”

Everyone needs an estate plan consisting of the following documents: a Last Will and Testament, a General Durable Power of Attorney and an Advance Medical Directive or Living Will.

Unless your estate is valued at more than $11.58 million, you may not be as concerned about federal estate taxes right now, but this may change in the near future. Some states, like Florida, don’t have any state estate tax at all. There are states, like Pennsylvania, which have an “inheritance” tax determined based on the relationship the person has with the decedent. However, taxes aren’t the only reason to have an estate plan.

If you have young children, your will is the legal document used to tell your personal representative and the court who you want to care for your minor children by naming their guardian. The will is also used to explain how your minor children’s inheritance should be managed by naming trustees.

Why do you need a Durable Power of Attorney? This is the document that you need to name a person to be in charge of your affairs, if you become incapacitated and can’t make or communicate decisions. Without a DPOA in place, no one, not even your spouse, has the legal authority to manage your financial and legal affairs. Your family would have to go to court and file a guardianship action, which can be expensive, take time to complete and create unnecessary stress for the family.

Advance Medical Directives, also known as a Designation of Health Care Surrogate and Living Will, is used to let a person of your choice make medical decisions, if you are unable to do so. This is a very important document to have, especially if you have strong feelings about being kept alive by artificial means. The Advance Medical Directive gives you an opportunity to express your wishes for end of life care, as well as giving another person the legal right to make medical decisions on your behalf. Without it, a guardianship may need to be established, wasting critical time if an emergency situation occurs.

Most people of modest means need only these three documents, but they can make a big difference to protect the family. If the family includes disabled children or individuals, owns a business or real estate, there are other documents needed to address these more complex situations. However, simple or complex, your estate and your family deserve the protection of an estate plan.

Let us help you with your Estate Plan.

Reference: TAPinto.net (Sep. 23, 2020) “Estate Planning–Getting Your Affairs in Order Does Not Need to be Complicated or Expensive”

 

Planning With Digital Assets

One of the challenges facing estate plans today is a new class of assets, known as digital property or digital assets. When a person dies, what happens to their digital lives? According to the article “Digital assets important part of modern estate planning” from the Cleveland Jewish News, digital property needs to be included in an estate plan, just like any other property.

What is a digital asset? There are many, but the basics include things like social media—Facebook, Instagram, SnapChat—as well as financial accounts, bank and investment accounts, blogs, photo sharing accounts, cloud storage, text messages, emails and more. If it has a username and a password and you access it on a digital device, consider it a digital asset.

Business and household files stored on a local computer or in the cloud should also be considered as digital property. The same goes for any cryptocurrency; Bitcoin is the most well-known type, and there are many others.

The Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA) has been adopted by almost all states to provide legal guidance on rights to access digital property for four (4) different types of fiduciaries: executors, trustees, agents under a financial power of attorney and guardians. The law allows people the right to grant not only their digital property, but the contents of their communications. It establishes a three-tier system for the user, the most important part being if the person expresses permission in an online platform for a specific asset, directly with the custodian of a digital platform, that is the controlling law. If they have not done so, they can provide for permission to be granted in their estate planning documents. They can also allow or forbid people to gain access to their digital property.

If a person does not take either of these steps, the terms of service they agreed to with the platform custodian governs the rights to access or deny access to their digital property.

It’s important to discuss this new asset class with your estate planning attorney to ensure that your estate plan addresses your digital property. Having a list of your digital property is a first step, but it’s just the start. Leaving the family to fight with a tech giant to gain access to digital accounts is a stressful legacy to leave behind.

Let us help you address digital assets in your estate plan.

Reference: Cleveland Jewish News (Sep. 24, 2020) “Digital assets important part of modern estate planning”