Moynihan Lyons PC

Empty Nest? Time to Adjust Emotions and Finances

Your lifestyle, budget and goals change. However, it is a good idea to go slowly on those adjustments.

You start a family, you nurture the family and the kids move on to their own lives. It is a challenge in many ways and it is time to make adjustments, according to the Daily Messenger in “John Ninfo: Some advice for empty nesters.”

With one less person in the household, it’s time to re-adjust your budget. Many of your everyday expenses, such as electricity, food and gas, will likely be lower. However, you may have new expenses that are related to your new life. You may spend more on activities that were put off until the kids grew up or find yourself dining out more often. Go slow when it comes to spending money on pricey vacations or fancy dinners. You want to strike a balance between enjoying your new-found freedom and cash flow, as well as keeping retirement savings in mind.

Assuming your cash flow is easier now, it’s time to commit to paying down outstanding debts, especially credit card debt. Reduce any interest or finance charges that you can. You might even think about paying down your mortgage or paying off a high-interest car loan. If you’ve taken on student loans or a home equity loan, now is the time to try to knock those down. At the same time, try to minimize any new spending or borrowing.

Take another look at how your retirement saving is progressing. Will you have enough at your current rate of spending, or should you ramp up your efforts, if you have room in your budget?

Have you thought about downsizing, or decluttering? Even if you are not planning on moving, your home may be filled with things you don’t need or want anymore. Set some time aside to clear out what you don’t need, donate what you can to a local charity or start planning yard sales. You don’t have to tackle this project all at once. It is possible to donate a few hours each weekend to the task.

When was the last time you updated your will and other estate planning documents? Now is the time to revisit these matters, as well as looking at any long-term care insurance. If you don’t have a long-term policy in place, this is the time to buy it—if you can.

Are you finding yourself with a lot of free time? We don’t often ask ourselves the important questions, like “What matters to me?” and “How do I want to be remembered?” Many people find the answers to those questions in service to others.

Reference: Daily Messenger (August 26, 2018) “John Ninfo: Some advice for empty nesters”

Business Owner? You Have Many Decisions to Make

If you don’t begin planning, until a life changing event, you may find it is much more difficult.

Business owners work hard to build a business and then decisions should be made to create a smooth transition, when the time comes to sell it or pass it on, according to Smart Business in “Questions for business owners to consider when estate planning.”

If the business owner waits until a life changing event, such as illness, to begin, it may well be too late.

First, the business owner needs to determine, if the business should continue or if it should be cashed out. If the owner wants to see the next generation take over, the owner will need to take a candid look at how engaged various family members are in the business and if they can realistically manage and continue to operate it, without the founder at the helm.

If there are many family members—kids, in-laws, etc.—then roles need to be defined, so everyone knows their responsibilities.

If there are children who have no interest in being part of the business, then a decision needs to be made about how they will benefit fairly.

If one of the owners of the business is not a family member, the owners need to discuss how that ownership is going to transfer, when one of them departs. You’ll need buy-sell agreements in place, as well as a succession plan. What will happen if one of the owners becomes disabled or dies unexpectedly?

The decision to sell the business or plan for the non-family management team to control the business, needs to be made and acted upon. The management team needs to be on board with these decisions and everything needs to be in writing.

The biggest obstacle to smooth transitions for business owners is failing to make a decision. If the heirs are left to figure things out and end up battling over shares of the business and responsibilities, the business will suffer and the family is often left needing to sell an unprofitable business that has lost value.

Planning for a business owner to step down, should start once the business is successful and profitable. Having a succession plan, which also includes an estate plan, prepares for any unexpected occurrences and allows family members to get comfortable in their roles as future leaders of the business.

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

Reference: Smart Business (Aug. 27, 2018) “Questions for business owners to consider when estate planning”

Where Does Social Security Fit into Your Retirement?

Your Social Security is yours. You worked for it and it should work for you.

Social Security is most likely just one part of your retirement plan and you should research how to make it work best for you, according to AZ Central in “Retirement planning: Connecting the dots between Social Security and IRAs.”

Not everyone takes a step back to think this way, but it is a smart thing to do. With proper planning, your retirement could lead to better results for your investments and a better decision on when to take Social Security benefits.

First, viewing Social Security as part of your investment portfolio is easy to do but not that widely followed. If you think of your Social Security benefits as a conservative portion of your overall investment portfolio, it may give you a little leeway to be more aggressive with investments than you might otherwise be. Remember to acknowledge your comfort level with the amount of risk, so you can sleep at night.

Social Security retirement benefits are very low risk, since they pay steady, government backed income with no market fluctuations. You don’t want to make a dramatic portfolio shift based on this, but you might change up your equity exposure by 5% to 10% of your portfolio, assuming that you’ve been risk averse up to now.

If you already have ample growth investments, thinking of Social Security as part of your overall portfolio might give you reason to trim your equity holdings. By using Social Security as your backstop, your investments may not need to work as hard and you don’t have to put yourself in a risky position.

How about tapping IRAs early, to avoid claiming Social Security benefits until as late as possible? It’s not a bad idea, since the payout from Social Security grows at 8% each year you wait, up to age 70. Most retirees start taking Social Security earlier, then get locked into a lower benefit.

If your income is lower in your 60s, your income taxes will be lower, so the level that your IRA withdrawals will be taxed will also be lower.

What about the stability of Social Security? It’s not certain that Social Security will remain fully funded without some government intervention. The latest annual report from the Social Security trustees estimates that if no changes are made, the system will be paying most but not all promised benefits by 2034, when the “trust fund” money runs out. However, as long as Americans are working and payrolls are generating money for Social Security, benefits will be available to pay future retirees.

An estate planning attorney can work with you to create an estate plan and get the best results from your retirement opportunities.

Reference: AZ Central (Aug. 26, 2018) “Retirement planning: Connecting the dots between Social Security and IRAs”

Want to Remain in Your Own Home while Aging?

  It is best to make the decision early and begin planning.

If you are considering aging in place, the best approach may be to begin planning early, according to LMTonline.com. in “BBB On Homes: Focus on several things when aging in place.”

The Centers for Disease Control and Prevention define aging in place, as the ability to live in one’s own home and community safely, independently and comfortably regardless of age, income or ability level.

Changes in health or finances don’t always allow this to happen. Here are four things to keep in mind, when considering whether you or a parent will be able to remain at home:

Safety updates. This generally includes a walk-in shower, safety rails, widened doorways that can accommodate wheelchairs, non-slip flooring, ramps and accessible kitchen drawers and food preparation surfaces.

Getting food and supplies. Food and medication deliveries are crucial to aging in place. What will happen, if you are no longer able to drive? If you depend on local stores for delivery and there is a major weather event, how will you manage? There are some non-profits who deliver but people must be open to the idea of receiving help from others.

Preparing for disasters and emergencies. Living alone makes it difficult to get help immediately after an accident. When time is of the essence, it can be difficult. There are many options, including medical alert systems and home surveillance cameras.  However, the person has to be willing to have them. Arranging for a friend or family member to check in daily is good for every day safety.  However, it will not help in an emergency.

You’ll need health care and transportation. If you live in a city or suburb where there is public transportation, you’ll be able to get to your doctor’s appointments. If not, you’ll need to budget for taxi services.

Budgeting. Living on your own means more independence and privacy.  However, it may cost more because certain fixed costs can only be reduced so far.

Reference: LMTonline.com (Aug. 26, 2018) “BBB On Homes: Focus on several things when aging in place”

Estate Planning Attorney Can Help Avoid Family Feuds

A daughter has some problems, as siblings are hurt by parent’s estate planning intentions.

Families can grow together with brothers and sisters under the same roof. As time goes by and aging parents must make tough decisions, things can get difficult with feuds developing. An estate planning attorney can help the family through these difficult times, according to a Faribault Daily News article “Attorney can smooth path for families making legal plans,”

The article tells of a reader who faced a problem from siblings, when the parents wanted to create a power of attorney for health and care decisions. The difficulties came from siblings who live far away but felt as if they not being included in their parent’s plans. For this particular family, one sibling lives 500 miles away and another lives 800 miles in the opposite direction. The one daughter who lives in the same community is the logical choice for power of attorney. What can be done?

The parent’s foresight in updating their estate plan and related legal documents is to be congratulated. The one adult child who lives in their community, is the best choice for power of attorney for medical and financial decisions, so they can quickly handle an emergency situation.

The parents have assigned the other two adult children as secondary POAs and everyone has already been informed that they will all receive equal shares in the estate. The out-of-town siblings should be happy at how fairly and expeditiously their parents are taking care of in these matters.

Adults need someone to be named to handle health care and financial decisions, if they become incapacitated and need someone else to make decisions. Having a POA puts others in place to take over any tasks. Having a secondary POA designates someone to step in, if the primary is unable to act.

When someone choses a POA because they don’t want to hurt any feelings, the result is often disastrous.

Some states also allow what is known as a “co-agent,” so that decisions are made together. But in an emergency, if the other person is not immediately present and time is an issue, this can lead to critical situations being unresolved.

One way to soften this kind of situation is to have the entire family meet with the estate planning attorney in a family meeting. With a professional who is not emotionally tied to the family dynamics, decisions can be explained, and cooler heads may prevail.

An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances and help smooth over family issues, if necessary.

Reference: Faribault Daily News (August 28, 2018) “Attorney can smooth path for families making legal plans”

Aretha Is Gone and She Didn’t Have an Estate Plan

The settling of her estate is likely to follow in the footsteps of Prince’s estate.

Aretha Franklin has passed away, leaving an $80 million estate and no estate plan, according to Investment News in “Aretha Franklin estate echoes planning problems of Prince.”

Franklin was not married so the estate will pass to her four children. It’s similar to the situation that occurred when Prince died unmarried and without a will in 2016.

Had she been married her estate would have passed tax-free to a spouse and there would have been planning opportunities available at that time.

Franklin’s four kids will now receive equal shares of her estate. However, they will have to pay a considerable amount in taxes. She was a resident of Michigan, which does not have an estate tax, so there won’t be a state estate tax. However, the federal government takes 40% of portions of the estate valued over $11.18 million. In other words, a $27.5 million tax bill.

Without the benefit of a trust being established by a will, those assets will be taxed again by the federal government at the time that the four heirs pass, when the money moves to her grandchildren.

Celebrity estates, like that of Franklin, must undergo a complex valuation process to correctly assign an approximate future value of income. Like Prince, there are image rights and music royalties, and the buzz surrounding her death is likely to inflate its value and the tax that will be levied.

While Michigan does not have an estate tax, the state does have a “postmortem right of publicity,” meaning that her heirs have the right to legally protect her image for commercial use. Her postmortem rights of publicity are expected to be extremely high, because of her iconic stature as a musician, songwriter and cultural touchstone.

Estates of celebrities and creative artists are required to be valued and the appraisal must be reconciled with a parallel appraisal conducted by the IRS. Remember Michael Jackson’s situation? The estate initially valued his name and image at $2,015, while the IRS valued it at more than $434 million.

One of Franklin’s children reportedly has special needs. This could put him in a precarious position. If he inherits a large sum of money, he will no longer be eligible for any government programs. Given the size of his inheritance that will not be a problem. For those with less wealth, however, that is why estate planners encourage the use of special needs trusts. This not only protects the child’s eligibility but protects them from misusing the money or being scammed by unscrupulous individuals.

Even if you are not an entertainer with assets that total in the millions, an estate planning attorney can advise you in creating an estate plan that fits your unique circumstances.

Reference: Investment News (Aug. 22, 2018) “Aretha Franklin estate echoes planning problems of Prince”

Divorce Can Hinder Retirement for Women

‘Divorce gap’ can have an impact on income, as well as on retirement planning.

A study from the Center for Retirement Research at Boston College found that divorced women historically are better off than single, never married women, because of the assets they have accumulated before divorce, primarily home ownership. However, that can have a negative impact on retirement, according to Money in “This is The Single Best Way Divorced Women Can Secure a Successful Retirement.”

Many divorce lawyers and financial advisors say that keeping the house after divorce, isn’t always the best move. Many newly-single women find they don’t have the resources to keep up with mortgage payments, maintain the property, pay taxes and deal with unexpected crises.

One advisor says she’s concerned that these new numbers will lead to women who can’t necessarily afford to maintain a home to hang on to their homes.

However, a researcher involved in the study maintains that while the study mentions homeownership, there’s a bigger point being made. Married women who divorce benefit from receiving a share of marital assets. Single, never-married women do not and must rely solely on themselves for saving and accumulating assets that can be used to finance their retirement.

A critical fact that women who are divorced must do: whatever assets they get in the divorce settlement, commit to keeping those assets intact for retirement. It’s easier to do this with a house. However, it’s tempting to dip into assets that are intended for retirement.

An estate planning attorney can advise you in creating an estate plan that meets your unique circumstances, including retirement planning.

Reference: Money (Aug. 10, 2018) “This is The Single Best Way Divorced Women Can Secure a Successful Retirement”

A Trust Might Be a Good Fit

There are many kinds of trusts. They aren’t just for the wealthy.

Everyone needs an estate plan. However, everyone should also at least consider a trust, according to The New York Times in “Life After Death? Here’s Why You Should Have a Trust.” It turns out that many people who are not wealthy, can also benefit from having a trust.

There are many different kinds of trusts which serve different purposes. One is a revocable trust, which the owner can change. They are considered by many to be the “work horse” of modern estate planning. A revocable trust can avoid the need for a public probate court proceeding after the person dies, saving time and keeping money from being immediately available to heirs and executors alike.

Trusts are also useful for times when people become incapacitated and need someone else to take care of their finances. Because many more people are living longer and the number of people with dementia is increasing, there are more situations where trusts are useful to the family and caregivers.

A will is different than a trust and is a public document. The probate process requires a disclosure of assets, bank and other financial accounts and the names of beneficiaries. That information remains private with a revocable trust.

Other considerations regarding trusts:

• You should have any type of trust set up by an estate and trust attorney.
• A house, real property, bank or investment accounts can be placed into a trust.
• A revocable trust does not always end at the death of the original owner. However, just how long it may last, depends upon the laws of your state.
• People also use trusts to protect their assets from others or to assure the long-term care of someone who is disabled.
• You can have a professional manager, family member or friend as a trustee or co-trustee of a trust. Sometimes having a licensed professional who has federal reporting requirements can provide an extra layer of protection.

An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances and may include taking a close look at trusts.

Reference: The New York Times (March 22, 2018) “Life After Death? Here’s Why You Should Have a Trust”

Just Starting Out with Family? Better Consider an Estate Plan

An estate plan is always important, if you have a family and even if you don’t.

Estate planning is especially important for families just starting out and is also important for setting up a plan to pass on assets in later years, according to the Lodi News Sentinel in “Planning for what comes last.”

Think of an estate plan as a gift for the next generation, as is making funeral plans in advance. You can’t assume that your adult children will know what you want for your funeral and you don’t want them to have to make decisions during a time of great sadness.

These are gifts, that parents who love their children can give: taking care of the business side of their lives and their deaths, so that a difficult time is less painful.

Once you have worked with an estate planning attorney to prepare all the necessary documents and made funeral plans, the next step is to share that information with your heirs.

It’s not an easy conversation to have. Most of us tend to keep that side of our lives private from our kids, no matter how old we become. However, sharing this information can keep families from fighting in the future.

It is not easy to know how much different members of the family can handle and who can be trusted with what information while you are living. There are times when people who appear completely selfless suddenly become greedy when an inheritance is being probated. It’s hard to anticipate this. However, there are several things that you can do now to make it easier for those you love.

• Have a will and if appropriate, a trust, created with an estate planning attorney. Don’t neglect a power of attorney for health and for finances.
• Make funeral plans and tell your family about those plans.
• Make an end-of-life plan. Don’t leave it to others to make these difficult decisions, if you know what you want to have done.
• Plan for your pets, in case they outlive you.
• Protect your digital assets by obtaining the correct information for all your social platforms, so your loved ones are empowered to access and close accounts after your death.

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

Reference: Lodi News-Sentinel (July 1, 2018) “Planning for what comes last”

An Estate Plan Really Needs to Be Official

Make plans for handling an issue, before it becomes an issue.

The legal issues that may surround a health problem, can go from bad to worse if you are not protected by legal documents expressing your wishes, according to the New Jersey Herald in “The importance of putting plans in writing.”

The message hits home especially hard, when the friends of estate planning attorneys experience problems that could have been resolved earlier with correct planning. In one example, a woman’s friend began to experience unexpected health problems. Her husband is incapacitated and there are no children to step in and help. The couple’s lack of legal documents has made a difficult situation even worse.

Although discussing concepts like end-of-life care can be challenging, all adults do need to have specific plans in place, even if their estate plan is basic: a last will and testament, a living will and a power of attorney.

It is never to early to put these documents into place. Everyone who is 18 years or older should at least have a designated power of attorney and a medical directive, in case they are unable to manage their own affairs or make healthcare decisions.

Unfortunately, many people still think estate planning is only for wealthy people who want to pay less taxes. Tax planning can help lighten tax liability for some. However, there are far more important reasons to do estate planning.

The main reason for estate planning is to set down expectations and wishes, while you are alive and after you pass. An estate planning attorney will help review the benefits of having a power of attorney and a healthcare directive. They can help, if the situation occurs where your loved ones have to make decisions for you. The amount of time, expense and frustration of going through a guardianship process can be avoided, if these items are in place.

An estate planning attorney can also help you with completing beneficiary forms for non-probate assets, preparing a funeral plan, planning a personal property memorandum and discussing elder care and planning for incapacity.

Making decisions in advance regarding who will care for minor children, if young parents cannot and who will be the person’s executor and handle all the details of their estate, are all necessary.

Many couples choose joint ownership and consider that their estate planning. However, that’s not enough. What happens when the last “surviving” joint owner passes? There are many other issues that need to be addressed.

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

Reference: New Jersey Herald (Aug. 22, 2018) “The importance of putting plans in writing”