Moynihan Lyons PC

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”

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”

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”

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”

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”

Don’t Let POA Age, until It Is Too Late to Use It

It is best to keep your POA up to date, so it can be used when it is needed.

While California Powers of Attorney do not expire, they can be rejected more frequently due to the passage of time. It is often useful to execute a form power of attorney provided by your bank in addition to your more general power of attorney if it appears they may be reluctant to honor the one you present.  Because you are granting someone else significant authority over your property, financial institutions are very concerned about liability issues should they honor an invalid power of attorney.  There are lessons to learn from this story out of Pennsylvania.

Does your Power of Attorney read “and”? Does it read “or”? Better be sure and better be up to date, so it does not face rejection, according to The Mercury in “Planning Ahead: Will your bank honor your power of attorney?”

In Pennsylvania, major changes were made to the POA law in 2014 that addressed wording, witnessing and other requirements and protections for the party accepting the POA. The “Vine fix” law describes what a bank, financial institution or other party who is presented with a POA can and cannot do. The “Vine fix” provides immunity to anyone who accepts a POA in good faith, without actual knowledge that the POA is invalid.

This law came about as a result of a case, Vine v. Commonwealth of PA State Employees’ Retirement Board. A Pennsylvania State employee, who was incapacitated following a car accident and a stroke was given a POA to sign by the man who was then her husband. He changed her retirement options and later filed for divorce. At issue was the question of whether Mrs. Vine could invalidate his option and file for disability benefits. She did not have legal capacity, when she signed the document.

This was a case of hard facts making bad law. The State Supreme Court found that a third party (the Pennsylvania State Employees Retirement Board) could not rely on a void power of attorney, even where it did not know it was void when it was accepted. Banks saw the decision and were concerned that they could be sued for damages in similar cases.

The new law offers some immunity and additional protections for banks. However, as a result, there’s a little more push back with banks recognizing agents under power of attorney. The bank can request an agent’s certification or affidavit or opinion of counsel, as to whether the agent is acting within the scope of his legal authority. There is still a civil liability for refusing to accept a power of attorney that meets all the requirements.

Some estate planning attorneys have their clients obtain Power of Attorney forms directly from the institutions. This decreases the chances of any problems, when POAs are presented. It’s also a good idea to update the POA when you update your estate plan, which should be every three or four years. Regardless of your state of residence, a POA dated 10 or 15 years ago is likely to meet with some scrutiny.

An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances and advise you on keeping it up to date.

Reference: The Mercury (April 2, 2019) “Planning Ahead: Will your bank honor your power of attorney?”

Inheritance War? Perhaps a Widowed Stepmother Is Behind the Scenes

Estate battles left behind by celebrities, can often teach a lesson or two.

Among the many issue that spark inheritance battles are Alzheimer’s disease, widowed stepmothers and estate crimes, such as questionable asset transfers and changes in investment risks, according to Think Advisor in “What the Nastiest Celebrity Estate Battles Can Teach Advisors.”

If regular family fights feel like civil wars, then celebrity battles elevate the conflicts into global meltdowns. Showbiz legends like Tony Curtis, Mickey Rooney and Jerry Lee Lewis serve as perfect examples.

Rock and roll legend Jerry Lee Lewis’s seventh wife (yes, seventh) and his third wife’s daughter have been in court for nearly two years. The wife has charged her stepdaughter with financial and physically abusing the singer, who is now 83. The daughter countersued, alleging that her stepmother was drugging her father into an incoherent state. Lewis recently had a stroke, and he was admitted to a rehab facility.

What can families do about elder abuse, which the American Bar Association has called the “crime of the 21^st century?”

Pay attention. Over the next 30 years, as much as $30 trillion in Baby Boomer assets will be transferred to the next generation. The number of people getting older is taking a huge leap and so will the number of people who suffer from cognitive-related diseases.

Know what an “estate crime” is. This is the term to describe the unauthorized, unlawful taking of someone’s assets, while they are alive. It’s what happens when a personal representative, such as a trustee, suppresses assets and takes them. It’s more likely to occur when an entrepreneur or business owner keeps a lot of cash in the safe. That money mysteriously vanishes at their death. Therefore, if anyone has a lot of cash around, they need to be able to prove it and give that documentation to someone they trust.

What happens when a person’s family is involved in litigation and they are incapacitated? Attorneys will look for transfers that occurred just prior to the time the person became incapacitated. Would they be the result of undue influence or pressure? What about their estate documents — were they changed near the time the person became seriously ill or when they were near to death? Medical records and doctors’ reports become important in these cases.

What happened to Tony Curtis, romantic and comic leading man? A year before he died, Tony Curtis wrote a new will and revised his trust. He disinherited his five surviving children and left his entire estate worth $46 million to his sixth wife. The children, who include actress Jamie Lee Curtis, filed a suit claiming that their father was mentally impaired, but the case was dropped. It’s possible that the suit was settled confidentially. Any time there’s such a big change before death, expect litigation.

Why do so many famous people seem to die without a will? People don’t like to think about death, so they procrastinate. It’s that way for celebrities and for regular people. However, we read more about celebrities. Estate planning attorneys are the ones who see what happens, every day, when people don’t have wills and the family is faced with estate battles.

What’s the solution? It’s not that complicated. Find an estate planning attorney that you are comfortable with and draw up an estate plan. Make sure you have a will, power of attorney and health care power of attorney. Talk with your family about your intentions for distribution of your property and make sure that every few years, when events occur in your life or when laws change, you update your estate plan.

Reference: Think Advisor (March 27, 2019) “What the Nastiest Celebrity Estate Battles Can Teach Advisors”

You Can Create Some Challenges with DIY Wills

You can save money now but leave some real problems for your heirs.

The complexities of today’s modern families in America, can make the creation of an estate plan a challenge and do-it-yourself wills and on-line wills can often create problems for families, according to Next Avenue in “The Problems With Do-It-Yourself Online Wills.”

The article reports that one DIY estate planning service had three different “packages” that consisted of the same document, just with different names. Those packages were also missing a key estate planning document that the average person would not know to ask about. Even attorneys who do not practice estate planning law, know to work with an estate planning attorney for their wills.

For those with complex financial and personal lives, a DIY service may not be able to address the estate planning issues. If you have over a certain level of assets, do you want to risk making a costly blunder that would easily be prevented by working with a skilled professional?

Think of it this way: there are some people who can have their taxes done online, because they receive simple tax forms from their employer. If there’s a mistake, the IRS sends a letter and they may have to pay a penalty or pay the taxes that were not paid properly. Simple, right?

If your estate plan doesn’t work, you’ll never know. However, your loved ones will, and they’ll be the ones to have to make things right.

Good estate planning is all about expressing our wishes. The documents that are prepared and the process of decisions about our wishes accomplish a number of tasks:

• Avoids court intervention in your family’s life,
• Reduces administrative confusion, and
• Reduces or eliminates unnecessary fees and delays.

The four basic planning documents are: a will, power of attorney for financial matters, an advance health care directive and if needed, a trust. If you expect to use any of these through a DIY website, expect to use a “fill in the blank” approach. Remember that every state has its own laws governing probate. Are you sure that the forms you are filling out are acceptable in your state?

Other DIY sites have some documents, but only if you purchase a high-end package. Others offer attorney consultations, but some consider an attorney consultation to be a series of questions and answers through an online app with pre-written responses, and not a real attorney.

The problem with DIY wills, is that we don’t know what we don’t know. We may know who we would like to receive our assets, but not what our state law requires to make that happen.

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

Reference: Next Avenue (March 29, 2019) “The Problems With Do-It-Yourself Online Wills.”

A Will Is Important with or without Assets

Helping the family to move forward during difficult times.

Estate planning basics such as a will, power of attorney, health care power of attorney and a plan to pass on assets to heirs, are beneficial to the family and set a plan to follow, according to WKBN 27 in “Attorney recommends everyone have a will in place to prevent avoidable issues.”

Think of the will as a way to speak for yourself, when you have passed away. It’s the instructions for what you want to happen to your property, when you die. If there’s a will, the executor is responsible for carrying out your requests. With no will, a court will have to make these decisions.

Many people believe that if they don’t have a will, their spouse will simply inherit everything, automatically. This is not true. There are some states where the surviving spouse receives 50% of a decedent’s assets and the children receive the rest. However, the children could be offspring from outside the marriage. Not having a will, makes your estate and your family vulnerable to unexpected claims.

A will must contain certain elements, which are determined by your state’s laws and must be signed in the presence of two witnesses. Without the correct formalities, the will could be deemed invalid.

Lawyers recommend that everyone have a will and an estate plan, regardless of the size of your estate.

Young parents, in particular, need to have a will, so they can name a person to be guardian of their child or children, if they should both die.

Details matter. In some states, if you make a list and neglect to name specifically who gets what, using the term “children” instead of someone’s name, your stepchildren may not be included. State laws vary, so a local estate planning attorney is your best resource.

You should also be sure to talk with your spouse and your children about what your intentions are, before putting your wishes in writing. You may not feel totally comfortable having the discussion. However, if your intention is to preserve the family, especially if it is a blended family, then everyone should have a chance to learn what to expect.

Wills do become binding, but they are not a one-time event. Just as your life changes, your estate plan and your will should change.

Don’t neglect to update your beneficiary designations. Those are the people you named to receive retirement accounts, bank accounts or other assets that can be transferred by beneficiary designations. The instructions in your will do not control the beneficiary designation. This is a big mistake that many people make. If your will says your current spouse should receive the balance of your IRA when you die but your IRA lists your first wife, your ex will receive everything.

Here are the four estate planning documents needed:

• A will;
• A living will, if you need to be placed on life support and decisions need to be made;
• A healthcare power of attorney if you cannot speak for yourself, when it comes to medical decisions;
• A durable power of attorney to make financial decisions, if you are incapacitated.

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

Reference: WKBN 27 (March 14, 2019) “Attorney recommends everyone have a will in place to prevent avoidable issues.”