Moynihan Lyons PC

Some Issues Often Overlooked in an Estate Plan

Check through the list of issues others have overlooked in estate planning. Avoid those mistakes.

Creating an estate plan is always a good idea. However, it is also a good idea to take a look at some commonly overlooked issues that can derail your plan, according to the National Law Review in “So You Think You’re Done with Your Estate Plan…”

The checklist:

Beneficiary Designations. These assets generally do not pass through the will, so the beneficiary named receives the asset, whether it’s proceeds from a life insurance policy or the entire contents of your investment accounts. These forms must be prepared and filed with the account custodian or the insurance company, so beneficiaries are properly identified. If you have not looked at these designations for more than a few years, it’s time to look at them again to make sure the ones you originally selected are still the ones you wish to receive your assets.

Trust Funding and Form of Ownership of Assets. You can easily wreck your entire plan by failing to fund trusts or retitle assets. If you’ve executed a Revocable Trust with probate avoidance in mind, for instance, and then fail to fund the trust, your beneficiaries will need to probate your assets. Assets owned jointly with rights of survivorship will not pass according to your will. If your estate plan was done with taxes in mind, you could put the entire plan at risk.

Talking with Family and Trusted Professionals. Having a plan no one in the family knows about, can lead to an estate disaster. Speak with family members so they know you have an estate plan and who they should be in touch with when the time comes. Your accountant and/or financial advisor should also be brought into the discussion.

Accessibility of Estate Plan and Related Information. If your documents are locked up in a safe deposit box or an encrypted file or secure portal, no one will be able to access them. Your estate planning attorney will be able to advise you, as to the best way to ensure that paper and electronic documents are available to family and fiduciaries when needed. The same holds true for burial and health care instructions. Prepare a list with the contact information of your estate planning attorney, basic information about your assets and other information that will be needed by family and fiduciaries.

Keeping Up with Change. Tax laws change and lives change. If you have been divorced, had a serious illness, or any major change to your assets, you’ll need to speak with your estate planning attorney to see if any of those changes need to be incorporated into your estate plan.

An estate planning attorney can advise you in creating an estate plan that fits your unique circumstances and can help you avoid some of those common mistakes.

Reference: National Law Review (Oct. 18, 2018) “So You Think You’re Done with Your Estate Plan…”

Just How Much Retirement Money Is Needed?

The amount first considered by potential retirees is almost never enough.

The amount of savings you will need for your retirement years is most likely a difficult question to answer. It is not as simple as picking a percentage of your salary and aiming for it, according to The Wall Street Journal in “How Much Money Will You Really Spend in Retirement? Probably a Lot More Than You Think.”

This is a complex question and one that requires more knowledge than most people have, even professionals. Just imagine the data you need:

• The cost of health care
• How much health care you’ll need
• The health of Social Security
• The rate of inflation
• Your risk tolerance level
• How you want to spend your time during retirement

Try figuring this out on your own. How can you know all or any of these items?

To better understand how people approach this question, hundreds of people were invited to a research lab and asked how much of their salary they thought they would need in retirement. The answer most people gave was about 70%. The people were then asked how they got to that number. The answer, not surprisingly, was they had heard it somewhere.

To dig in deeper, another group of participants was asked specific questions about how they wanted to enjoy their time during retirement. Based on this information, the cost of these activities was calculated and then a calculation was done to find out what percentage of their salary they would need to support the type of life they imagined they would have in retirement.

The answer was 130%. That meant their savings rates would have to double for a successful retirement.

How is this possible? Working is cheap. You’re not spending a lot because you’re busy working. The company pays for your health insurance, life insurance and there’s even a breakroom stocked with great coffee and snacks.

When you retire, you’re spending money you would not be spending while you are working. Two big vacations a year, recreational activities and dining out more all add up quickly. So how can you plan successfully for the retirement lifestyle you want?

Think (realistically) about the costs of the activities you have in mind and get as detailed as you can. Once you know how much you want to spend, add them up. Use a spreadsheet or a notepad, but this exercise will give you more information than the simple conventional wisdom of 70%.

Reference: The Wall Street Journal (Sep. 3, 2018) “How Much Money Will You Really Spend in Retirement? Probably a Lot More Than You Think”

What Can Grandparents Do to Protect Their Grandchildren?

The opiate addiction problem has increased in America in recent years and grandparents can find it difficult to help their children and grandchildren.

Opioid addiction in the U.S. has highlighted a problem that grandparents face, when they attempt to step in to support their grandchildren. There are some legal actions available for grandparents, according to an article in the Chillicothe Gazette concerning legal tips from a Southern Ohio Legal Services attorney “Need to help care for grandchildren? Here’s some legal tips.”

Depending on the state and the circumstances, these steps may also be useful for others seeking to help young children in their families:

Visitation rights: Grandparents can file to get visitation with their grandchildren in most states. The court will determine whether it is in the best interest of the child.

Grandparent power of attorney: In most states this requires the consent of the parent. However, it is a means by which grandparents can legally perform certain actions for their grandchildren, such as getting medical treatment or enrolling them in school. Parents have the right to revoke this at any time, although it is a faster process than other options.

Caretaker authorization: If the parent has left the children and no one knows where they are, but legal authorization like seeking medical treatment or interacting with the school is needed, a caretaker authorization can be granted by the court. The parent can revoke this at any time. However, in some situations, grandparents might be able to delay the parent taking the kids for up to two weeks. This delay also requires filing for custody.

Kinship placement: When children are removed from the care of their parents, courts and agencies often look to a relative for emergency placement. If grandparents can agree for a longer placement, a background check and a class may be the next step for evaluation. If approved, Child Services will retain legal custody, but you have rights to care for your grandchild in the meantime.

Custody: This is an emotionally challenging process because grandparents have to show that their adult children are not suited to rear their own children. It can be a difficult thing to attain and parents can push back in many ways. However, once custody of grandchildren is attained, it makes applying for medical assistance, cash assistance and food stamps possible. The parents may not qualify for some benefits, but the children may. That also includes Social Security and child support.

Adoption: This is the final step, since it permanently severs the legal rights of the parents. Parents can agree for their children to be adopted or a court order can allow adoption.

Reference: Chillicothe Gazette (Oct. 8, 2018) “Need to help care for grandchildren? Here’s some legal tips”

All Families Need to Be Wary of Elder Abuse

There are some safeguards you can put in place to protect your loved ones.

Two recent stories of financial abuse of the elderly involving wealthy people are highlighted in the news. However, if the truth be told, all families need to be prepared to protect vulnerable family members from elder abuse, according to AARP in the article “7 Ways to Prevent Financial Elder Abuse.”

Stan Lee is a legend, and not just among comic book fans. The 95-year old creator of Spider-Man and many other superheroes has been enmeshed in a legal tangle that includes charges that a memorabilia collector is attempting to isolate Lee in order to gain control of his fortune, which is estimated at $50 million. A Los Angeles court has issued a temporary restraining order against the collector, who says the charges are false.

An American hero, Buzz Aldrin, is battling with his two younger children, accusing them of trying to get control of his estate by saying he has dementia. He sued his own children in court. They deny doing anything wrong and say his memory loss and increasing confusion is to blame.

Experts believe these kinds of cases will grow as America ages and will continue to remain largely unreported, because most families don’t want to report or prosecute these crimes. Ninety percent of the perpetrators are family members or other people the victim knows well, including caretakers and neighbors. As we get older, we’re not as savvy about finances and sharp operators take advantage of this.

Here’s how you can protect yourself and your aging family members:

• Before anything happens, make a plan that includes power of attorney and heath care directives.
• Stay connected with loved ones through regular visits or phone calls. Video chatting is also good.
• Develop a relationship with your parent’s caregiver. Make sure that she knows you are involved.
• Become a “trusted contact” and monitor banking and investment activities.
• Sign up for a service that tracks financial activity and notifies you of any unusual withdrawals or changes in spending habits.
• Set up direct deposit for checks that arrive regularly, so they won’t have to cash them or ask someone else to cash them.
• Don’t sign any document that you don’t understand and don’t be rushed into signing anything.

Having to keep your guard up to protect yourself or a family member, is not how we like to think of our golden years. However, unfortunately it is necessary.

An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances and can also advise you on protecting family members from financial abuse.

Reference: AARP Bulletin (Sep. 2018) “7 Ways to Prevent Financial Elder Abuse”

Social Security Remains Popular through the Decades

Despite popularity, the debate has continued for years and years.

Social Security began decades ago, as a government program to help alleviate extreme poverty in America’s elderly population and the debate for and against has gone on for more than half a century. Despite all of that, it still seems to be popular and beneficial for the wealthy as well as the poor, according to AZ Central in “Social Security: Designed to help poor Americans in old age, it’s a relatively good deal for wealthier ones, too.”

In some ways, it can be said that Social Security has failed to live up to the goal of helping the most downtrodden Americans. The debate over the agency’s progressive features, or lack thereof, has been going on for many years.

Some supporters say Social Security is progressive and achieves its goals. One group is the Investment Company Institute, a mutual-fund trade group that says government paid benefits replace a much higher percentage of working-year earnings for lower-paid Americans. This is especially true when you take into consideration the fact that low earners pay less in Social Security payroll taxes during their working lives.

However, there are some factors that make Social Security less progressive than intended. Many of people die before they claim any benefits. For this reason, many Americans file earlier than they otherwise would, locking in benefits at a low level. Poor people don’t live as long as wealthier people so they tend to claim early and not receive benefits for as many years. Social Security benefits are based on earnings, lower-earning Americans receive lower benefits.

Other factors impact how much money people receive from their Social Security benefits. One progressive feature: there is a cap on monthly benefits. In 2018, it’s nearly $2,800. That means billionaires won’t receive anything more than a retail clerk, which counts one for the progressive side.

On the other hand, what you receive in benefits is partly based on how much you earned and how much you paid in payroll taxes. That tax rate is 6.2%, whether you are a middle manager or a millionaire. Therefore, the income replacement part of Social Security is progressive, but there are tax and other aspects that make the entire picture somewhat murky.

Here are some pointers for making Social Security part of an economically successful retirement:

• Delay claiming benefits if you can past age 62. Benefits increase about 8% each year, up to age 70.
• Work longer, if you can. Even a few more years of working and delaying claiming Social Security, can be a boost to your retirement income.
• Contribute whatever you can to workplace plans. At least contribute enough to make the most of any matching plans from your employer.
• If you don’t have an IRA at work, open one on your own.
• Use the retirement saver’s credit, a federal tax benefit worth up to $2,000 for an individual (and $4,000 for joint filers) to help low-income people afford an IRA or 401(k) plan.
• Be mindful of tax liabilities when you take withdrawals from retirement savings accounts. You should also remember that withdrawals could impact your Social Security benefits and make them partially taxable.

Reference: AZ Central (Sep. 16, 2018) “Social Security: Designed to help poor Americans in old age, it’s a relatively good deal for wealthier ones, too”

Thinking Estate Plan? Don’t Overlook Digital Assets

You may find yourself running into federal and state roadblocks, when it comes to digital assets.

Americans generally understand the value of an estate plan in order to distribute assets and support the family. However, one of the newest form of assets can often be overlooked. Those assets are digital, according to Think Advisor in “The Big Hole in Estate Plans: Digital Assets.”

The person who now does not have an active online life is the exception. Many people don’t realize that they have substantial digital assets with both sentimental and financial value. Without a clear plan that specifies what someone wants to be done with these digital assets, there are both federal and state laws that can block loved ones—even those named executor or power of attorney—from accessing those assets.

Digital asset planning must now be part of every comprehensive estate plan to ensure that any disposition of a person’s wishes for these assets takes place.

The concept of estate planning for digital assets actually covers a broad range of assets from email to social media to PayPal, domain names, intellectual property and cryptocurrency. Some assets may only have sentimental value but others such as domain names or business contact lists in email accounts may also have significant monetary value.

Without a clearly documented plan, data privacy laws can prevent the online service provider from allowing an executor or family member access to these accounts. The Uniform Fiduciary Access to Digital Assets Act, which has been passed in most states, provides that an owner of digital assets can specify who can access and dispose of any digital assets after death.

If there has not been any planning, the online provider’s terms of service agreement, or TOSA, will control what happens to accounts after death. In some cases, TOSA will even override directions in a will or other document, especially when the service provider has provided specifications for how account holders are expected to make their post-mortem wishes known.

Note that instructions by a person using their online provider’s tools, will supersede any instructions in the will, so include these documents in the estate plan. They should be updated regularly.

People need to create comprehensive lists of all their digital assets, including instructions on how they want these assets to be handled after they die. They should list user names, passwords and security questions. Do not include this information in the will, because it can be accessed publicly during probate. They then need to review the TOSA and follow each platform’s rules for providing post-mortem access.

An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances and will most likely include digital assets.

Reference: Think Advisor (Oct. 4, 2018) “The Big Hole in Estate Plans: Digital Assets”

What Medical Care Is Acceptable at End of Life?

What are your thoughts on this difficult subject?

End-of-life circumstances are not always known in advance, so it is important to prepare for emergency solutions and what life-saving measures are acceptable. Aare family members prepared to make those decisions, or would you prefer to plan for those in advance? All of these questions are best answered in advance, according to The Herald-Mail titled “It’s never too early to prepare for the end of life.”

Spare your loved ones from the agony of making decisions, based on what they think you might have wanted by planning in advance for what is, without question, unpleasant to consider. Nevertheless, in today’s era of medical technologies, such scenarios are quite possible. Let’s start with the advance directive.

Advance directives are legal documents that include both a living will and medical power of attorney. The living will allows you to document your specific preferences for medical care at the end of life. These range from aggressive intervention that saves your life, to palliative comfort care that gives medication to alleviate pain and suffering. There is a wide range between the two, so the more specific you can be, the better your loved ones will know what you want.

A medical power of attorney lets you designate a trusted person—spouse, friend or adult child—to make decisions for medical care, if you cannot do so. This is also known as a health care surrogate or proxy.

Here’s what happens when no advance planning has occurred. A critical medical situation arises, and family members are contacted. Without having had a discussion about the person’s wishes, typically an aging parent, siblings don’t know what to do. If they do know what to do, but there is no legal document attesting to their parent’s wishes or if the legal document is not physically present, the medical provider is bound by their own determination of the situation and their professional code of ethics.

That action may not be what you would have wanted. However, your family or trusted friends do not have the right to make decisions, if legal documents are not in place. The solution is relatively simple: plan in advance.

First, give serious thought to what you would want to occur. Make a list of questions to discuss with your primary health care physician.

Second, have a conversation with family members and friends about your wishes, and discuss with them their role in such situations. Are they willing to carry out your wishes and to take on this responsibility?

Third, meet with your estate planning attorney and prepare the necessary documents.

Reference: The Herald-Mail (Oct. 8, 2018) “It’s never too early to prepare for the end of life”

Pets in the Family? Are They in the Estate Plan?

You want your pets to be comfortable but who will be responsible?

Pets can often become members of your family and if you are worried about what will happen to them when you pass away, the problem can be solved through your estate plan, according to U.S. News & World Report in “How to Build an Estate Plan for Your Pets.”

How much time and money you devote to your pet’s care, after you are no longer able to care for them, varies widely from state to state and depends on what you consider a comfortable lifestyle for your furry pals. You might include your pet in your estate in some states, or you may do better with a pet trust.

Include your pet in your will. One option is to use your will to leave your pet and some money to a trusted caretaker. This is kind of like leaving a collectable car to someone, as opposed to asking someone to be a guardian for your minor children. You are transferring the pet as an asset and making a bequest of a certain amount of money for their care. However, the funds are transferred with the hope that the person will use them as you intend because the use of the money is not legally binding.

Have a pet trust created. This is admittedly a more expensive way to go but it gives you more control over the care of your pet. It allows you to set up a plan that mirrors how you’d create a plan for guardianship, rather than a piece of property. Your estate planning attorney will know what your state allows for pets.

The key part of a pet trust is the designation of a primary caretaker or physical custodian who will be responsible for caring for your pet on a daily basis. The second is a trustee, who will be sure that funds allocated to the pet trust are managed, invested and paid out as needed.

Get buy-in from the trustee and the caretaker. This is not something you want to spring on someone after you’re gone. Make sure the people you have in mind understand what you want them to do and what their responsibilities will be. You also want a back-up plan. Some shelters, especially no-kill shelters, have plans for taking in pets for the rest of their lives, although they do request a donation be made. Visit the facility and make sure you understand how their program works before naming them as a back-up on your pet care plan.

Know how much this will cost. Caring for a quarter horse will have a completely different cost than caring for a 70-pound golden retriever. If you can, track the cost of care, including food, toys, vet visits, groomers, etc., over the course of a year. Talk with your vet about expected medical costs for the future, especially if your pet is very young. Plan out your budget carefully, so the caretaker will have enough money, then leave a little extra for unforeseen circumstances.

Keep your pet care plan up to date. Just as your estate planning documents need to be kept up to date, so do those for your pets. If you add another furry member to the family, or if one dies, make sure that your estate plan reflects these changes.

An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances and may include family pets.

Resource: U.S. News & World Report (Sep. 20, 2018) “How to Build an Estate Plan for Your Pets”

Surviving Spouse Needs to Look Carefully at Social Security

If you are the surviving spouse, you can most likely get advice and help from Social Security but make sure the information you receive is correct.

Receiving the correct information from an employee of the Social Security Administration isn’t always easy, according to “Inaccurate info from Social Security Administration a challenge for widows.”

The article describes the situation of a friend of the authors, who was unexpectedly widowed when her husband died at age 44 of a massive heart attack and was left with a toddler, a teenager, insufficient life insurance and household income that had been cut in half. She managed with the help of Social Security benefits.

Now that she is planning her retirement, she’s struggling to get to the heart of her benefits as a surviving spouse. She’s not the only one facing this issue.

Her financial advisor recommended that she claim her survivor Social Security benefits when she retires next January and then switch to her own benefits at age 70, when the amount has maxed out.

Three separate calls to Social Security Administration representatives resulted in three incorrect answers. They told her that she was not entitled to survivor benefits, because her own retirement benefits were larger. Each reported that there were new “deemed filing” rules that require anyone born after Jan. 1, 1954, to file for all available benefits at the time of the claim. They also said that people who are born after that date are no longer allowed to claim one type of benefit first and then switch to another.

This misconception was based on an old file and switch method that was changed and is no longer available. However, the change does not apply to survivor benefits. The agents did not know the difference.

Earlier this year, an internal Social Security Administration report found that agents and representatives gave widows and widowers incorrect advice 85% of the time, based on random samples of claims by surviving spouses, who were also entitled to claim their own retirement benefits.

Social Security had been a blessing for the widow, as she received dependent benefits for two children as she struggled as a single parent. When the kinks were worked out, she was pleasantly surprised to learn that her survivor benefit was much larger than anticipated, given the short span of her late husband’s working years.

 However, this incident and the statistics from the study should serve as a warning to those about to navigate their own journey for Social Security survivor benefits. Don’t be afraid to ask questions, call more than one time and visit the Social Security website to get information on your benefits.

An elder law attorney can advise you on Social Security options.

Reference: Investment News (Sep. 12, 2018) “Inaccurate info from Social Security Administration a challenge for widows”

Remarriage Can Create Estate Plan Challenge

When a remarriage takes place late in life, potential problems can arise over an existing home.

It’s not always an easy situation when a spouse moves into the home of their spouse when they marry. Would the surviving spouse receive the home when the other dies? Does the home go to children from a previous marriage or previous arrangement? A good estate plan can resolve many potential problems in a remarriage situation, according to the Times Herald-Record, in “How to preserve your home’s value when remarrying.”

With poor planning, you might end up with your assets going to your second spouse and then, to his or her own children, leaving your own children empty-handed.

A common approach is to leave the surviving spouse the right to use and occupy the residence, with a provision in a trust or a will that the surviving spouse pays taxes and home insurance costs and maintains the house. The right to live in the house can be for a limited number of months or years or until they pass away or enter a care facility. When the surviving spouse dies, or the time limit is reached, he or she leaves the house, the house is sold and the proceeds are divided among the children of the owner’s spouse.

There are other ways to provide more flexibility to the surviving spouse. If the house is too large or expensive to maintain, he or she may be given the right to use and occupy a substituted property, which may be purchased with the proceeds from the owner spouses’ home. Another arrangement allows the owner spouse’s home to be sold with the surviving spouse using the income from the proceeds of the sale of the house to pay for a rental. When the surviving spouse dies (or when the term expires), the children of the first spouse inherit what is left.

A few important things to consider: how well the surviving spouse will be able to maintain the house, either for financial or physical reasons. If the surviving spouse is not taking care of the house and it falls into disrepair, the children may have to file an eviction proceeding. If the trust or will does not specifically instruct the surviving spouse to pay for home maintenance, the children of the owner spouse would be responsible for those costs, and depending on how long the surviving spouse lives, that could be a large burden for a long period of time.

This situation requires thoughtful planning, with many “what if’s” to be asked. An experienced estate planning attorney who has worked with second marriages and home ownership issues, will be able to provide an objective view of the issues and the solutions.

An estate planning attorney can advise you in creating an estate plan that fits your unique circumstances, including a second marriage.

Reference: Times Herald-Record (Sep. 22, 2018) “How to preserve your home’s value when remarrying”