Moynihan Lyons PC

Some Retirees Following in the Steps of ‘The Golden Girls’

  If you live together, there’s a good chance of stronger financial security and support.

Deborah Knox, who is 75 years old and has Parkinson’s disease, decided she needed some help in order to remain living in her home. She decided to seek a roommate and successfully avoided assisted living, according to the AARP Bulletin in “Housemate Wanted. Must Lift Heavy Objects.”

This is not unusual for the newest retirement dynamic — senior housemates. Older Americans are seeking companionship, mutual care and in some cases, a less expensive living situation. The number of households headed by renters 65 and older is expected to balloon by 80%, according to the Joint Center for Housing Studies at Harvard University.

A small industry has emerged from this need. There are companies that match housemates, doing background checks and matching up older renters. There are also companies that focus on older homeowners with housemates who can also help with chores.

The Golden Girls model is alive and well. The trend is more common among women, possibly because women tend to live longer than men and may feel more comfortable living in a communal setting. However, there are challenges. Living with a housemate isn’t without issues. A renter may feel unsettled by the lack of control, while a homeowner may feel agitated at having to share possessions and space.

Sharing houses may not be the American dream, but it may present a solution for seniors who want to maintain their independence.

Shared housing takes work. It also benefits from rules that are written down and agreed upon in advance. One woman purchased an eight-bedroom house in Portland and rented rooms to women who were like her — 55 and older and single. The tenants make their house rules and collectively decide who joins the community. So far, all but three rooms are filled.

Finding a roommate who isn’t family to live with requires some caution, advise experts. Some services offer a two-week trial and prepare for a confrontation if it does not work for you. Explore all issues, especially the thorny ones, in your first interviews. If your politics or spiritual practices are vastly different, there may be no way to overcome that. You should also discuss the details. Does one person like to watch television all the time, at full blast? If you prefer a quiet house, that’s not going to work out.

Put it in writing, from how costs will be divided to how bills will be paid. Who will be responsible for what chores? Are overnight guests permitted? Does the homeowner have the ultimate say? The more details you can cover, the less room for quarrels.

Reference: AARP Bulletin (March 14, 2019) “Housemate Wanted. Must Lift Heavy Objects”

A Health Care Directive Can Become Real Important, Real Fast

What happens if you suddenly cannot make your own decisions?

A health care directive can become very important, if you should find yourself incapacitated. That is why it is part of a comprehensive estate plan, according to the McPherson Sentinel in “Advance health care directives important to all adults.”

Documenting your wishes about future health care lets a cognitively healthy person express their wishes with a clear perspective. Unfortunately, only one in four American adults has their advance health care directive in place. Many wait to begin the planning process, until they are in their 50s or 60s. The problem is, life doesn’t have a plan. At any time in life, tragedy can strike. A serious illness or an accident can occur, and leave the family wondering what the person would have wanted.

The most common advance directives including a Durable Power of Attorney for Health Care, Living Will, and pre-hospital do not resuscitate directive, known also as a “DNR.”  California also recognizes a POLST (Physicians Order for Life Sustaining Treatment) which, because it is a medical order, must be signed by the doctor to be valid.

The Durable Power of Attorney for Health Care allows you to name a person to make medical decisions for you, in the event you cannot. They are also referred to as a “Medical Power of Attorney” or “Health Care Agent.”

This is different than a Durable Power of Attorney, which gives a person the right to act as another person’s agent and conduct all business and financial matters on their behalf.

It’s very important that the people you name to fulfill these roles are told that they have been named. They need to fully understand what your wishes are, what kinds of treatments are and are not acceptable for you, your preferences for doctors and where you would like the treatment to take place.

The person selected will need to be trustworthy and have the ability and willingness to communicate your wishes, even if family members don’t agree with your choices. They will need to follow your wishes, even if they are not the same as their own.

Keep family dynamics in mind. If a younger sibling is selected to be your health care agent and they have been dominated throughout their life by an older sibling, will your wishes be honored, or will they become the subject of an extended argument?

A Living Will is a document that details the type of care you want to receive at the end of life. It explains your wishes about accepting life-sustaining procedures, like being placed on a ventilator, receiving artificial nutrition and hydration, if at least two physicians deem your condition to be terminal.

These documents should be prepared for you as part of your overall estate plan, with the guidance of an estate planning attorney. Be aware that the laws vary from state to state, so you’ll want to work with an attorney who knows your state’s laws. If you relocate to another state, you will need to have your estate plan updated to ensure that it is still valid.

Reference: McPherson Sentinel (April 17, 2019) “Advance health care directives important to all adults”

Thinking of Passing on the Family Business?

Who will work in the business? Who will control the business? There are many, many more questions.

Passing on a family business isn’t as simple as selling your business, because it isn’t just financials and operations that must be considered. It would be very wise to consider the family dynamics in order for the situations to proceed as peacefully as possible, according to the North Bay Business Journal in “How to plan for a smooth transition of your family business.”

Estate planning attorneys can serve as sounding boards in creating a balance between what will be best for the business and what will work to maintain peace and cohesiveness in the family. With experience in guiding families through this process, they are able to provide an unbiased view and can be helpful, when hard decisions need to be made.

Another part of the plan is having the family and the estate planning attorney meet with other professionals, such as a wealth manager and CPAs. This is especially helpful when the owners are reluctant to talk about what is happening in the business with their children, before clarifying their own thoughts about the business.

Taking time to step back and gain some perspective before holding a family meeting where decisions are made, will give the owners more clarity.

A succession plan often starts a business plan. Once there is a plan for the future of the business, it’s an easier transition to financial and estate planning. Taking these steps can help the business’ success. Any business will run better when the numbers and projections for future growth are in place. Banks and other lenders look favorably on a company that has its financial reports in place.

This also permits tax planning to be done properly. In some cases, transferring a business or other asset, while the owner is still living can be beneficial in the long run, even with today’s higher federal estate tax exemptions.

Lifetime gifts can be a way to reduce estate taxes because making a gift today before there has been substantial appreciation, is one way to leverage the gift and estate tax exemption. Let’s say an asset is valued at $1 million, but at the time of your death it may be valued at $8 million. By giving it today, you can use less of your lifetime exemption.

To transfer the business to one or more children and give them an opportunity to succeed on their own, through their own efforts, consider bringing them in as a responsible manager with some ownership.

A gradual approach in transferring control of a business is a wise move, experts say.

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

Reference: North Bay Business Journal (April 9, 2019) “How to plan for a smooth transition of your family business”

Beware of New Social Security Number Scam (and Don't Send Anyone Gift Card Pins)

As an Elder Law attorney, I am always on the lookout for scams that target seniors.  Here's one that hit home this week. - Maureen Lyons

I just got a phone call from one of my clients.  She was a bit shaken as she told me  about a call that she had just received. Caller ID indicated that the Social Security Administration was calling. It was a recording telling her that there was some suspicious activity associated with her Social Security number and that the number had been suspended.  She was told to respond immediately. The caller was asking her to confirm the number.  Thankfully,  she  hung up, and called me immediately.

I knew that it was a scam, but I didn't know how prevalent it is. I did some research via Google. According to the FTC, more than 35,000 people reported the scam to them in 2018.   Here's what the FTC has to say about the scam: This is what a Social Security scam sounds like.  There is even a recording of one such call.

Apparently, in addition to obtaining your Social Security number, scammers often advise you to drain your bank accounts before you account is frozen and use that money to purchase gift cards to hold your funds.  Next, they ask you to provide them with the pin numbers on the cards.  If you fall for this, say good-bye to your money.  It's gone.

The FTC said that most consumers don't fall for the scam.  But they do worry that someone has their social security number.  

Here's what you should know:

1. Never give out your Social Security number over the phone.
2. Don't trust Caller Id. Scammers can make your Caller Id show the name and number of the SSA.
3. Social Security is never going to call you and threaten to suspend your Social Security number.
4. They won't ask you to wire funds.
5. It is always a scam if you are being asked to buy gift cards.

 

So, Your Parents Need Help Handling Their Finances

Are you prepared to take over your parents’ budget, if the time comes?

Your parents are now seniors and after years of taking care of you, they now need your help. Where do you begin? That’s the question asked in the Daily Times’ article “Senior Life: What a nightmare! Untangling a loved one’s finances”?

After the health crisis is over, it’s time to get busy. Open the door to the home and start looking. Where’s the will, where are the bank statements and where’s the information about Social Security benefits? When you start making calls or going online, you run into a bigger problem than figuring out where the papers are kept, no one will talk with you. You are not legally authorized, even though you are a direct descendant.

This happens all the time.

Statistically speaking, it is extremely likely that your parent will end up, at some point, in a nursing home or a rehabilitation center for an extended period of time. Most people have no idea what their parent’s financial situation is, where and how they keep their financial and legal records and what they would need to do in an emergency.

It’s not that difficult to fix, but you and your hopefully healthy parent or parents need to start by planning for the future. That means sitting down with an estate planning attorney and making sure to have some key documents, most importantly, a Power of Attorney.

A Power of Attorney (POA) is a legal document that gives you permission to act on another person’s behalf as their agent if they are unable to do so. It must be properly prepared for your state’s laws. It allows you to pay bills and make decisions on behalf of a loved one, while they are alive. Without it, you’ll need to go to court to be appointed as legal guardian.

If you have downloaded a Power of Attorney and are hoping it works, be warned: chances are good it won’t. Many financial institutions insist that the only POA they will accept, are the ones that they issue.

Once you have a POA in place, assuming that your parent is able to sign it, then it’s time to get organized. You’ll need to go through all the important papers, setting up a system so you can see what bills need to be paid, how many bank accounts or investment accounts exist and review her financial status.

Next, it’s time to consolidate. If your parent was a child of the Depression, chances are they have money in many different places. This gave them a sense of security and gives you a headache. Consolidate four different checking accounts into one. The same should be done for any CDs, investment accounts and credit cards. Have her Social Security and any pension checks deposited into one account.

An estate planning attorney can advise you in creating an estate plan that fits your unique circumstances, as well as point you in the right direction, if the senior financial situation develops in your life.

Reference: Daily Times (April 9, 2019) “Senior Life: What a nightmare! Untangling a loved one’s finances”

The Amount of the Retirement Check Is?

You have heard of various retirement strategies. It might be time to take a closer look.

You spend years saving and planning for your retirement, but it can often turn out that you don’t know how big the retirement check will be. It’s time to take a closer look, according to CNBC in “You probably don’t know how much your retirement paycheck will be. New technology is working to change that.”

Unless you are a trained professional, like a financial advisor or a CPA, chances are good that you have no idea how to transform a lifetime of savings into a steady, tax-efficient income stream. A study for the Alliance for Lifetime Income asked pre-retirees, if they have done the math to figure out how much money they’ll need for retirement. About 66% say they haven’t done the calculations. Just 38% of households can count on having a pension or an annuity to provide a steady stream of cash.

In response to this common question, one company has launched a feature that was created to help you create a steady paycheck in retirement. The company, Kindur, was founded by a woman whose career included nearly two-decades in asset management at J.P. Morgan. She was inspired by her own experience helping her father decide how to draw down his assets. After devoting hours to Social Security books, she realized that technology could solve this problem. Throughout her career, she saw how financial institutions used technology to present and manage complex information. The goal of her company was to take this complexity out of retirement income planning.

Kindur, however, is not alone in this space. The founder of Social Security Solutions and Income Strategy found himself wishing there was a way to coordinate retirement income some ten years ago. He teamed up with the investment strategy chair at Baylor University for what he thought would be a short project. In the end, it took years to sort through all the rules of Social Security. However, a platform was created to help people figure out claiming strategies. His second company analyzes accounts from which they should withdraw and when.

Another company, Income Strategy, provides users with help to figure out how to withdraw money and provides the option of how that transaction will be executed.

The future will likely hold more of these kinds of platforms, as the next generation becomes more comfortable with allowing AI (Artificial Intelligence) to manage their money and their withdrawals. For now, most people are still more comfortable with a person providing financial guidance, although that guidance is often helped by AI. Together, AI and an experienced professional make the best advisors.

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

Reference: CNBC (April 7, 2019) “You probably don’t know how much your retirement paycheck will be. New technology is working to change that.”

Tax Planning Is Only a Part of Estate Planning

The tax codes change, and the estate plans need a fresh look.

The new tax laws have not made estate planning simpler. They have created a situation where it would be wise to take a fresh look at estate, retirement and disability planning, because those plans work together in one package, according to the Daily Times in “Planning Ahead: Estate planning is not just tax planning.”

Wills have often been drafted for people in upper tax brackets concerning assets and what belongings should be passed to children and grandchildren. However, because federal estate exemptions are now very different, the question arises on whether the estate plan achieve the goals desired?

Here are some of the questions to ask:

• What do I own?
• Can I maximize what I own?
• Where will my assets go upon my death?
• Who will care for minor children or disabled relatives, if I die?
• What will happen if I become disabled?
• Will I have enough to pay for my children’s education, my retirement, or for even my potential disability or that of my spouse?

Estate planning goes beyond drafting a simple will, or even a complex trust. Wills and trusts are personal documents. Sometimes people decide that other things are more important than taxes. That’s why a simple online form does not answer all the questions when creating a will.

An unmarried couple may decide there are more tax benefits to being married, if a state has an inheritance tax that is higher for people who are not related.

It makes the most sense to name a young person as a beneficiary of an IRA, so the asset can grow (“stretch”) over the years. However, you may have someone else in mind for the IRA.

Decision making in estate planning is not something that happens instantly, and it does change over time. That is why it is important to review an estate plan every few years.

The critical thing is to have an estate plan in place. You can adjust it as time goes by, but without one your family faces many added difficulties and costs.

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

Reference: Daily Times (April 9, 2019) “Planning Ahead: Estate planning is not just tax planning”

Add Fourth Leg to Chair and Strengthen Retirement

Social Security, private saving and pensions…plus one more leg to stabilize the chair.

It may be the time for some to scrap the three-legged retirement tool and go with four legs, in order to be protected from the financial situations that can develop, according to News Max in “New ‘4-Legged Stool’ Can Mend Broken Retirements.”

The questions about the future of Social Security, the end of pensions at most companies and retirement savings hurt by past market crashes, have all combined to take a toll and the answer may be to strengthen the chair to four legs.

Here’s how to build a four-legged chair for retirement:

Income. This is the smallest leg on the chair, and in this case, is not income from your retirement accounts. It’s not pension income either. In this case, the income is a small stream of income during retirement. Maybe you’re a greeter at a store, or a part-time consultant to people you worked with throughout your career. Perhaps you do what a lot of retirees do: start a business, selling on eBay or Esty. Whatever it is, a job that brings in a few thousand dollars a year can make a difference in your retirement stability.

Social Security. Social Security may not be going away completely, but it is possible that the amount of benefits will be reduced. The trust fund will be exhausted in 2034, there are some big demographic shifts now underway with more millennials in the workplace than boomers and depending on your point of view, the changes to Social Security may be big, little, or none at all. Expect something to change. That’s why the small part time job that brings in a little bit of income could be a retirement-saver.

Non-Tax Advantaged Accounts. Retirees need liquidity in retirement. If you have lots of money in your IRA, 401(k), or SEP accounts, that’s great. However, that money may not be immediately available and there are tax consequences to selling those assets that can do damage, if you withdraw too much in any given year.

It is better instead to have a mixture of demand and investment accounts, including checking accounts, savings accounts, money market, and mutual fund accounts. Checking and saving accounts are the most immediately liquid, while money market and mutual fund accounts are less liquid. They could result in a taxable event, if assets are liquidated. The benefit of having money in a taxable investment account, is that you can take that money out with no limitations. If you are taking money from a 401(k) or an IRA before age 59½, you’ll get hit with taxes and possibly penalties. Yes, you may have to pay capital gains taxes on your earnings, but at least those funds are readily available to you if you need them.

Tax-Advantaged Retirement Accounts. These accounts have become the mainstay of most people’s retirement funds. Investment choices are limited for most people, since they are determined by the company handing the accounts for your employer. However, many plans offer benefits, like matching contributions. This is free money, and it is always recommended to do whatever you can to take advantage of any employer matching plans. It lets you make more gains than you would just from your own savings efforts.

These accounts come with strings. You can’t touch them until you are close to retirement age, but there are benefits. If they’re not performing, you can make changes within the restrictions of the investment company. While it’s not easy to figure out what the market is going to do next, with the help of representatives from the companies running the retirement portfolio, you can make informed decisions.

Reference: News Max (April 11, 2019) “New ‘4-Legged Stool’ Can Mend Broken Retirements”

Have a Farm? Have a Family Business? Do You Have the Right Documents?

Times can get tough for your family, if you don’t have your documents.

If you are a farmer, a business owner or actually just an adult, there are a some crucial documents that you need to protect yourself and your loved ones, according to Ag Week in “Five documents every farmer should have.”

While there are five crucial documents everyone needs, according to an AARP report, six of 10 seniors don’t have a will, the number of farmers who have an estate plan is even fewer and advance care directives are even farther down on the list. That is not good for families.

Farm and ranch families often find themselves facing complicated issues about how the land should be divided among the next generation, and whether the next generation will continue to maintain the ranch or farm. This is something that estate planning addresses.

Many people think of the will as the estate plan. However, it’s only part of the plan. The will says who will inherit property, including assets and debts, and who will be responsible for carrying out your directions. That person is the executor, who acts as your agent when you have died.

While there are online wills available, it is recommended that farm and ranch families work with an estate planning attorney. They are encouraged to meet with a few, until they find one who they are comfortable with and they believe has the experience that suits the family’s situation. The attorney will help with how property is titled and how to handle the tax implications. These are both important parts of an estate plan.

Every adult needs an advance health care directive, the legal document that specifies the medical procedures that they want to maintain life, if there is a health crisis. An advance directive usually involves a living will, and names a person as health care power of attorney to make health care decisions, when you are unable to do so for yourself.

The living will is used to specify the types of medical procedures you do or do not wish to have performed to keep you alive. Medical professionals or first responders often do not have access to this document and must follow their legal and ethical requirement to maintain life, in any way possible. Make sure this document is readily available and that other family members know where it is located.

Provide a copy of the living will and durable power of attorney to your doctors and the institutions that usually provide your care. The power of attorney should specify who has primary responsibility to make these decisions and at least one alternate.

Talk with your physicians about your feelings and wishes for these documents. They may also benefit from having the person you have named as your power of attorney with you at the time of the conversation. That way everyone is clear about what your wishes are.

A power of attorney is given to an individual, your agent, who can make financial decisions on your behalf, if you are incapacitated. They can write checks, make deposits and have access to your safe deposit box. There will be forms to fill out, so don’t delay having them created and properly executed.

While it is not legally enforceable, write a letter of intention to accompany your will. Give a copy of your letter to your executor, and possibly to a trusted family member. This way, you can make sure they know:

• Where important documents, including life insurance policies, savings accounts, loans, leases, titles to property and other legal documents are located.
• Instructions for the care of minor children. Your will should name a guardian, but any information you can share about your children will be helpful.
• Instructions of what you want to happen to the family land.

Reference: Ag Week (April 5, 2019) “Five documents every farmer should have”

When Did You Last Review Your Estate Plan?

Estate planning should not be a one-time occurrence. Here’s a handy tip:  Do it.  Review it.

You’ve gathered all the financial information needed and your taxes are filed. What’s next? Since you have the financials gathered it might be the very best time to create an estate plan or, if you already have one, a real good time to review the aging document, according to The Pathway in “Giving your estate plans a check-up.”  

If you are among those Americans who actually has an estate plan in place, consider this: when was the last time you reviewed or updated the plan? A person’s estate plan is a living document that needs attention on a regular basis, once it is done. Life changes, tax laws change and estate plans need to reflect those changes. Here are some key reasons to update your estate plan:

People in your life. The relationships you have with the people named in your will, or in your trusts, or as your trustees, may have changed. There may have been happy changes, like birth and marriage, or sad changes, like divorce and death. You might not be close with your colleagues at work because of a job transfer, or your college friends have moved far away and would not be able to serve as your agents. Life changes, and so does your estate plan.

Assets undergo changes as well. If your estate has changed for better or worse since the last time your estate plan was executed, there may be provisions that no longer make sense. If life has been good to you, you may decide to expand an initial donation to a charity that would welcome your generous gift. If you’ve added life insurance coverage, you may want to change how other assets are distributed.

Locations change. Have you moved? If you have changed your state of residence, you must have your estate plan reviewed with an attorney as quickly as possible. Estate law is governed by each state, and what worked well in New Jersey, may not work in Arizona.

Changes in tax laws. After the latest large federal tax law, estate tax exemptions changed dramatically. Plans that you made prior to the tax change may no longer be necessary or may fail to accomplish your goals. There may be advantages that you are missing.

The passage of time. If it’s been more than three years since you’ve reviewed your estate plan and will, it’s time to do so. Locate your original will, review it with an attorney and see if any changes are needed. In a perfect world, you would do this every year after completing your taxes.

People who reach age 70½ years, are required by law to start taking Required Minimum Distributions (RMDs) from their IRAs, 401(k)s, SEPs or other qualified plans. As you review your estate plans and retirement accounts, this is a good time to also review your beneficiary designations.

An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances or review the old one.

Reference: The Pathway (April 1, 2019) “Giving your estate plans a check-up”