Moynihan Lyons PC

Introducing Our Redesigned Blog

We've redesigned and relocated our blog! Enjoy the same great content and weekly updates via email. We'll keep our archive right here, but for fresh news, visit us at https://www.moynihanlyons.com/blog/.

Should Your Retirement Money Go to You or the Children?

Options for retirees are often to enjoy retirement, pursue passions or leave inheritance.

The growing cost of retirement that can sometimes be three decades long, brings some difficult questions for retirees: spend it or save it, according to the Warwick Advertiser in “Will You Spend Your Retirement Savings or Leave It Behind? The Answer May Surprise You.”

For many people, the goal of retirement is to do all the things that had to be put off while working. That might include a hobby that requires time and resources, travelling, purchasing a vacation home, or fulfilling a dream of going back to school. If that’s your retirement dream, bear in mind that these dreams all come with costs. Spending in the early stages of retirement often goes up, as retirees are still healthy enough to do everything on their bucket lists.

Given the reality of longer life expectancies, it’s important for retirees to understand that they may be living from their retirement investments for three or more decades. That means that you’ll need to have enough money to cover routine expenses plus health care and most likely, long-term health care services. Make sure your financial planning takes these factors into account.

Once you know how much money you’ll need for your costs of living and health care, plus inflation, then what’s left behind is your retirement fun money.

Knowing how to work within the constraints of a budget is actually more important during retirement. You can’t just go back to work for a few decades, if you find yourself running short. You still may need to pick up a part-time gig on the side.

What if leaving a legacy is more important to you than buying a second home? Just like the plan for retirement fun, you’ll need to do some financial planning to make this goal come to fruition. Remember that your legacy will include whatever is left at the time of your death, as well as what you may give while you are living.

Giving your children or grandchildren their inheritance while you are alive, is a way to enjoy the gift twice — once when you give and a second time when you see what they do with your gift. You might want to help the family reach their own financial milestone, like covering the cost of a college degree, helping with a deposit on a home or helping to pay off a mortgage.

Charitable giving may also be part of your legacy. If there is a charity, foundation, or alma mater that aligns with your values, you may choose to set aside a portion of your estate for a donation.

Regardless of whether you are planning on spending everything, giving away your assets to family members, or to a preferred charity, an estate plan is necessary.

An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances.

Reference: Warwick Advertiser (April 18, 2019) “Will You Spend Your Retirement Savings or Leave It Behind? The Answer May Surprise You”

Where Do You Want Your Assets to End Up?

Meeting with an estate planning attorney is a good way to get started and meet your goals.

The size of the estate really doesn’t matter. If you have assets, you really do need to have an estate plan, according to the Observer-Reporter in “Set up an estate plan so your assets go where you want.” If you don’t have an estate plan? It is unlikely your assets will end up where you want them to go, as state law takes over.

If your will was done more than four years ago and was never updated, it may lead to some unwanted results. If people you named as beneficiaries or executors have died, or if there were divorces in your family, these are examples of changes that should be addressed in the estate plan.

Many people don’t know that insurance policies, annuities, 401(k), or IRA accounts that have a designated beneficiary are going to the designated beneficiary, regardless of what is in the will. If the will says everything in the estate should be divided equally between children, but one child was named the beneficiary on the life insurance policy, then only the named child will inherit the insurance policy.

Another part of an estate plan that is needed to ensure that your wishes are followed, is a financial power of attorney and a health care power of attorney. The financial power of attorney gives the person you name the legal ability to make financial decisions for you if you are incapacitated. The health care power of attorney, similarly, gives the person you name the power to make health care decisions for you if you cannot do so for yourself. A living will is another part of planning for incapacity that is a part of a comprehensive estate plan. The living will lets your wishes for end of life care be known to others.

Assets that pass to heirs through beneficiary designations do not go through the probate process. However, assets distributed through your will do so. Probate administration of an estate takes some time to complete, depending upon where you live. In some states, probate is more involved and time consuming than in others.

Another reason why people like to avoid probate is that documents, including your will, are filed with the court and become part of the public record. That’s why many people who lose a family member find themselves receiving direct mail and phone calls about buying an insurance policy or selling their home.

There are ways to minimize the number of assets that pass through probate, which your estate planning attorney will be able to explain. Trusts are used for this purpose. There are a variety of trusts that can be used, depending upon your circumstances. Some are used to protect inheritances if a person has an opiate addiction or cannot manage her own affairs. Others are used, so individuals with special needs do not receive inheritances that would make them ineligible for government benefits.

Reference: Observer-Reporter (April 19, 2019) “Set up an estate plan so your assets go where you want”

What to Do When Parents Can’t Handle Their Finances

Mom, Dad — Time to turn in the car keys.

So, you’re becoming concerned about your parents handling the challenge of driving and handling their finances. It is a tough issue for anyone. However, some suggested steps to take are outlined by Considerable in “Here’s how to know when it’s time to take control of your parent’s finances.”

The tricky part is figuring out the timing. If it is done too early, you’ll be battling with your parents. Conversely, if it is done too late, major financial damage may be done.

Keep your eyes open for signs that your parents are not able to maintain their responsibilities. That includes changes in their behavior, misplacing things and not being able to locate them, or making too many trips to the bank for reasons that they can’t or won’t explain. Another clue: purchasing things they never bought before. You may notice paperwork piling up on a desk that used to be tidy and organized.

One woman didn’t realize that her mother was being scammed, until she had sent more than $100,000 to scammers. Elderly financial abuse is pervasive, and the Senate Special Committee on Aging estimates that elderly Americans lose some $3 billion annually to financial scammers.

One elderly woman suffering from dementia, forgot to pay her long-term care insurance premiums and lost the coverage. The company had sent five notices, but she was not able to manage her finances.

Even those who have close relationships with their parents and their daily events can have slip ups. Often, the children don’t step in, until the parent has a health crisis, and then it becomes clear that things have not been right for a while. If one parent is overwhelmed by taking care of their spouse, an otherwise organized person may become prone to making mistakes.

The earlier children can become involved, the better. Children should ideally become involved with their parents, while they are still healthy and able to communicate the necessary information about their financial lives. If the family waits until illness strikes or dementia becomes apparent, there may be significant and irreversible damage done to the parent’s finances, like the woman who lost her long-term health care coverage. There are some instances where the court need to become involved, if the parents are not able or willing to let the children help.

It is not likely to be an easy problem to handle but an elder law attorney will be able to help with the process.

Reference: Considerable (April 18, 2019) “Here’s how to know when it’s time to take control of your parent’s finances”

 

Big Mistakes in Estate Planning That You Can Avoid

It is important to have a plan and important to keep it up to date.

If you don’t have an estate plan, your family can face some really difficult times and find themselves in a disagreement that can cause harm, according to The San Diego Union-Tribune in “6 estate-planning mistakes to avoid.”

Even attorneys run into problems with their family estate plans. One attorney was devastated when her mother was diagnosed with Alzheimer’s disease. As the mounting costs continued for 10 years, and tragedy struck again when her two older brothers died just before her mother passed away, she learned first hand just how important having a plan in place can be for the family. Without a plan, everything is more challenging and costly. Here are the top six mistakes that people make:

Not having a plan. No one wants to think about death, dying or incapacity, especially when they are relatively young and healthy. However, that is the best time to put a plan in place. Start by making sure you have powers of attorney for both health care and finances. Otherwise, you risk having the court making decisions on your behalf, instead of a trusted family member.

Not communicating your plan or wishes. Make sure that your loved ones know what your plan is. The people who have been chosen as your financial power of attorney and health care power of attorney need to know that they have been named and what your wishes are. Having a plan is step one. Communicating its wishes and its location is step two. Miss one step and the plan is worthless.

Doing estate planning only with taxes in mind. A comprehensive estate plan addresses much more than tax planning. It includes charitable giving, planning for a family member with special needs, succession planning, planning for children from a prior marriage, planning for your pets and more.

Leaving assets directly to minors. Giving assets to a minor will lead to the necessity of the court appointing a custodian or guardian if one is not named in your will. There may be problems with a court-appointed guardian, who may have a different idea of how the money should be used, not to mention associated costs.

Neglecting to update how assets are titled. Today’s family often means a blended family. Therefore, how assets are titled can have a big impact. If one spouse purchased a home long before the second spouse and their children joined the household, who inherits the house? There are tax consequences and control issues that arise in a blended family that requires advance planning and a lot of communication. In community property states, this can become particularly messy.

Failing to fund or update trusts. If a trust is not funded, it will not achieve its desired outcome. Assets that are not retitled when trusts are created, will not avoid probate. These are the details that make or break an estate plan.

An estate planning attorney can advise you in creating an estate plan that fits your unique circumstances, as well as keeping it up to date as changes occur in your life.

Reference: The San Diego Union-Tribune (April 18, 2019) “6 estate-planning mistakes to avoid”

Prince’s Estate Remains in Turmoil

Prince died three years ago without a will. A $200 million estate could take decades to settle.

Multitalented entertainer Prince died three years ago of an opioid overdose and he did not leave behind an estate plan or a will. And, there has been little progress as the court had to sort through claims from 45 people who said they were heirs as well as consultants, according to the New York Post in “Fight over Prince’s $200 M estate could go on for years.”

The estate includes a 10,000 square foot Caribbean villa, a mansion in Minneapolis and master tapes of his recordings. The estate has been estimated by some to be worth in the neighborhood of $200 million.

Right now, the heirs are in a court battle with the estate’s administrator, which has already blown through $45 million in administrative expenses. That’s from a probate-court petition filed by Prince’s heirs. They’ve asked the court for a transition plan and a new administrator, which is scheduled for the end of June.

One observer noted that this estate may take decades to resolve, all because there was no will.

A judge had to determine who Prince’s heirs were. More than 45 people stepped up to claim inheritance rights when the Purple One died in 2016. Some said they were wives, others said they were siblings and one said he was the artist’s son. DNA testing debunked that claim.

The list of heirs has been narrowed down to six: his full sister, Tyka Nelson, and half-siblings Norrine Nelson, Sharon Nelson, John Nelson, Alfred Jackson and Omarr Baker.

Until fairly recently, the heirs were divided and quarreling among themselves. For now, they have come together to challenge the court-appointed bank that became the estate’s administrator, Comerica. The estate was being run by Bremer Trust at first, but that was a temporary appointment.

The statement said they don’t agree with Comerica’s cash flow projections, accounting, or inventory of estate assets. They also claim that Comerica is not being responsive to their concerns. What is even worse, they say that Comerica is the reason that the estate is $31 million behind on estate taxes, which are continuing to accumulate interest.

The company stated that it was the best possible administrator of the estate and insisted it is making all tax payments necessary to settle the estate.

Everyone needs to have a will (even with a small estate) so that heirs are not left battling over assets.  

An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances.

Reference: New York Post’s Page Six (April 19, 2019) “Fight over Prince’s $200 M estate could go on for years.”

Supporting Favorite Causes in Your Will or Trust - (Endangered Species Day)

Today, May 17, is Endangered Species Day.  It is incredible to reflect on the fact that so many species of animals are so close to becoming extinct particularly when the causes involve purely selfish human activities such as poaching, trafficking in animal body parts, the ruination of habitat, and the broader impact of climate change.

This Newsweek article provides a list of critically endangered species and suggestions for what we can do to protect them compiled from information gathered by WWF and the Endangered Species Coalition. ENDANGERED SPECIES DAY 2019: LIST OF MOST THREATENED ANIMALS AND PLANTS IN THE U.S. AND WORLD.

The list of endangered species most affected by short term climate change includes almost two dozen species including certain elephants, gorillas, orangutans, tigers, leopards, rhinos, turtles, and other sea life.

Suggestions include direct actions regarding recycling and choosing to use alternatives to herbicides and pesticides.  But of course, another option is to provide financial support.

Clients often express their wish that they could support their favorites causes followed by comments indicating their concern that they can’t give right now. They are afraid of running out of money later or of depriving their kids of their inheritance.

This is when we talk to them about how they can provide for charities in their estate plan.  Gifts can be structured in a variety of ways.  If an outright gift of a specific amount doesn’t appeal to them, they might consider whether they have highly appreciated assets or IRAs that might be left to charity in order to avoid some significant tax hits.  Or, they can specify a percentage of the trust or estate that should be distributed to the charity.  They can even make the gift contingent on whether the total value of their trust or estate exceeds a certain amount.

 

Not everyone has a favorite cause that they would love to support.  But if they do, there is probably a good way to make it happen.

Reference: Newsweek (May 17, 2019) ENDANGERED SPECIES DAY 2019: LIST OF MOST THREATENED ANIMALS AND PLANTS IN THE U.S. AND WORLD.

Single Women often Need to Play Catchup in Retirement

 
Retirement can be a challenging time for unmarried women.

The retirement savings for single women can be lower than married, or even widowed, women. That should be taken into consideration, when planning retirement, according to Barron’s in “The Single Woman’s Guide to Retirement Planning.” Married women may face a steep decline in income when their spouses dies. However, their single peers don’t have the opportunity to inherit a partner’s assets and spousal benefits from Social Security.  

Most retirement advice is geared toward couples. There needs to be a different plan for singles, because no one is going to save with them. They need to save and plan more.

Retirement security for Gen Xers was the topic of a study from the Employee Benefit Research Institute. This is the generation that was born between 1961-1981. The study found that only in one group of Gen Xers — single women — were 50% at risk of not having enough money to cover retirement basics. The average expected shortfall was as high as $73,000. That’s twice the estimated average shortfall for single men and more than triple that of widows. The gap continues into the highest income levels.

Americans are staying single longer and marriage rates are declining. Those trends, and the relatively new phenomenon of “gray divorce,” points to more women facing this scenario in the near and distant future. A little more than half of millennials, have never been married. When today’s older retirees were the age of today’s millennials, they were mostly married — only 17% were single.

Because the risk of running out of funds is higher for women, some advisors favor a more conservative approach, with lower expected returns on an investment portfolio. Add to that, the fact that women provide much of the caregiving to others and afterwards end up having to look after themselves. Perhaps that’s why so many occupants of nursing homes are women.

Advisors to women also recommend that they purchase insurance to help with the cost of long-term care. The first phase tends to come from family members. However, if you don’t have children or family living nearby, you have to be more careful about planning for long-term care costs.

About two thirds of people living alone at home over age 85 are women, according to a 2017 study from the Society of Actuaries. Living at home brings its own challenges and costs. Advisors tell single women that they should consider continuing-care retirement housing earlier than married couples.

Estate planning is especially important for single women. It’s crucial to be sure that documents, including a will, possibly a revocable trust, powers of attorney for both finance and health, and a HIPAA waiver, are in place, while they are well. For those who have trouble naming a proxy (substitute decision-maker)  due to a lack of family, an estate planning attorney can help to identify a private professional fiduciary or financial institution that can serve as a proxy and act as a co-trustee.

Finally, single women need to check on the beneficiary designations on their accounts. Some pensions do not allow for non-spousal beneficiaries, so it might be better to roll the pension into an IRA.

Reference: Barron’s (March 4, 2019) “The Single Woman’s Guide to Retirement Planning”

What If the Children are Not Independent – Yet?

At what point does asking for loans, become elder financial abuse?

It is often a challenge for a child to grow up and become an adult. Perhaps more importantly, for the child to become independent from the parents, according to Newsday in “Good to Know: Are your grown-up children taking advantage of you?”

Plenty of parents don’t know what to do when they are asked too many times for too many financial favors. They may feel pressured to agree, worried that they may see their grandchildren or their children less, if they say no. That’s a bad reason for generosity. If the parent is asked to co-sign for a large purchase, like a home or a car, they need to put the brakes on and discuss this thoroughly with their child. It may also be a good idea to speak with an estate planning attorney, for an objective viewpoint.

There needs to be recognition of the child’s creditworthiness. Have they borrowed money from their parents or other family members and failed to pay it back completely, or made only partial payments, and only after being reminded repeatedly? Don’t expect behavior to change. Parents facing this example also need to discuss this between themselves. They should only “lend” money that they can afford to lose.

If the child has been turned down for credit through regular financial channels and the bank of Mom and Dad is the only option, find out why. Ask them for a credit report and be transparent about your concerns. Can you afford to pick up the mortgage payments, if the child fails to make them? What about car loan payments?

Taking advantage of parents can extend past money. Some families welcome their grandchildren with open arms for unlimited times. However, if you find yourself babysitting on weekends and several week nights during the week, it’s time for a discussion. For one family, whose son was interested in spending time with a new fiancé more than with his two toddlers, the situation went on for nearly a year, until the parents gathered the courage to speak up.

They added up all the time they were spending each week taking care of the children. It has turned out that they were watching the children for fifteen hours or more each week. This was discussed calmly. They then made it clear that they were happy to continue caring for the children, but for a far more reasonable period of time.

If you feel that your children are taking advantage of you, you’ll need to have a discussion in a calm and reasonable manner. If there are financial matters that are spinning out of control, speak with your estate planning attorney about how to create a plan to stop the flow of money.

Reference: Newsday (April 14, 2019) “Good to Know: Are your grown-up children taking advantage of you?”

It May Be Late but It’s Not Too Late to Plan Retirement

If expenses for the kids have been reduced, you have a chance to make your financial situation stronger.

Is your 401(k) going to see you through retirement? Good question but if the answer is no, it is not too late to take a fresh look at your finances and plan for your retirement, according to Bloomberg in “Bigger 401(k) Contributions Are Easier for Empty Nesters.”

We all wish we had taken the advice printed in the 401(k) materials we got at work long ago: be disciplined about savings, put away 10% of your income and maybe 20%, if you can manage it. Every time you get a raise, increase your savings. The longer you wait to save, the more likely you’ll be among the millions of Americans struggling to maintain their lifestyle in retirement. You’ve heard all this. It was great advice. However, those recommended percentages are difficult to do.

It is little wonder then that the average combined 401(k) IRA account balance for American working households in 2016 is about $135,000, according to the U.S. Federal Reserve. That would equate to a household income of $600 monthly in retirement. It is not quite enough to maintain your lifestyle, is it?

Before throwing your hands up in the air, consider that you are far from doomed. Instead, take the opportunity to build your household finances, by continuing to work. This is especially true, if you are an empty nester. The number one solution to a successful retirement is working longer. Even a few years can have a large impact.

Empty nesters who are still working are in the best position of all. The cost of raising children is expensive. Well-off married couples with a child born in 2015 can expect that child to cost about $372,210 from birth to age 17 (that’s in 2017 dollars), according to the U.S. Department of Agriculture. When the children are out of the house, cash flow changes.

If you can keep working, and if the children can become financially independent, your retirement saving should be able to shift into higher gear. The most important thing for empty nesters is not to get comfortable with the new cash flow, when the kids move out. Instead, put away more.

Working longer has now become increasingly common. The civilian labor force participation rate of Americans ages 60-64 increased to 57% in 2018, from 44% in 1987, according to a report from the Brookings Institution.

Knowing that there’s time to save for retirement later in your career is liberating and not as difficult as saving while the children are still with you. There is time to restore your finances, if you take the right steps when the time is right.

Reference: Bloomberg (April 8, 2019) “Bigger 401(k) Contributions Are Easier for Empty Nesters”