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”

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

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

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

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

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

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

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

 

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

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

Single Women often Need to Play Catchup in Retirement

 
Retirement can be a challenging time for unmarried women.

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

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

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

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

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

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

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

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

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

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

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”

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”

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”

Lee Bouvier Radziwill’s Estate Not as Generous as Her Sister’s

Only living child receives $50 million estate

Jackie Kennedy Onassis’ sister leaves her entire estate to her only living child, in contrast to her sister’s final plans, according to the Daily Mail in “Lee Bouvier Radziwill's Last Will and Testament shows that her lone surviving child, Anna Christina 'Tina' Radziwill, will inherit her estimated $50 million estate.”

Lee Bouvier Radziwill, sister of Jacqueline Kennedy Onassis, left her entire estate to her only living child, Anna Christina Radziwill. Neither of her nieces, Caroline Kennedy or her widowed daughter-in-law, received assets.

It’s quite a contrast to Jackie Kennedy Onassis’ will, which generously instructed that each of Lee’s children were to be given $500,000. However, the relationship between the ex-princess and her daughter-in-law Carole DiFalco Radziwill allegedly waxed and waned, after her son Anthony’s death from cancer. Lee herself was said to be hard pressed for cash, because of an extremely extravagant lifestyle, but her own mother had set up a trust for her benefit decades ago.

Radziwill’s last will and testament was signed on Sep. 20, 2018, less than five months before she passed away. She died at age 85 of apparent natural causes in her apartment in New York City.

Because her son Anthony predeceased his mother, her will stated that she has one child, named Christina. She directed her executors to sell her New York City co-op apartment as soon after her death as may be practicable and to dispose of the proceeds, as part of her estate.

Throughout her high-profile life, Lee would reportedly turn to her sister Jackie and ask for funds to finance her lavish lifestyle. In response, Jackie did not leave any money for her sister in her own will, explaining simply that she had provided for her sister during her lifetime.

Lee was married to three men, who left her substantial funds. The last was Herbert Ross, a wealthy director and producer. However, in her own will, light is shed on a trust set up for her by her mother, Janet Lee Auchincloss, a leading member of American society in Newport RI, and Washington, D.C.

The executor of Lee’s wills are two friends, one who lives in Cornwall CT and another who lives in Harding Township, NJ.

Lee’s relationship with her daughter-in-law received a nice grace note, when Carole wrote about her mother-in-law and said that even though her husband was gone and there were no grandchildren, which often bonds in-laws, Lee always introduced her as her daughter-in-law, and even after long absences, she never wavered.

Ironically, the first item in her estate states that all debts and funeral expenses be paid as soon as practicable, and that no extraordinary means or special accounting loopholes be taken to avoid paying any death taxes. That’s an interesting comment from someone who was blessed with wealth, glamour and connections, but never had enough money to fund her own lifestyle.

Reference: Daily Mail (March 29, 2019) “Lee Bouvier Radziwill's Last Will and Testament shows that her lone surviving child, Anna Christina 'Tina' Radziwill, will inherit her estimated $50 million estate.”