I was honored to help US News and World Report recently in their article “6 Mistakes Grandparents Make When Helping Pay for College” we had a nice long conversation which was used for a couple of articles. Discussed in this article are making sure that you do not miss tax breaks, that if you choose to use savings bonds that you title them correctly, and that you are careful about the timing of your gift to the grandchild so that you do not harm their financial aid chances.
Tag Archives: Estate Planning
Long Term Care Planning: More than just insurance
My financial planning engagements are very detailed, especially for clients that are nearing retirement. I find when talking with colleagues at conferences and continuing education meetings that many of them do not discuss how Medicare works, the potential cost of healthcare in retirement, or even potential Long Term Care needs. I know that the clients who come to me, often come to me with misconceptions about these items. Which is understandable, since they have never encountered these situations before. I feel good about introducing them to these topics so that they can prepare.
One of the most common misconceptions that I see is, if someone needs to move into a nursing home that Medicare will cover the cost. While Medicare will cover medical care for skilled nursing care for 100 days, they do not cover custodial care. What I tell people is Medicare is health insurance, and if you are being rehabilitated and your health is expected to improve then that is health insurance and you are covered. But if you are not expected to improve, and you are needing coverage to pay for Activities of Daily Living to care for you like eating, bathing, dressing, toileting, walking/moving from the bed to a chair, then that is not health insurance, that is Long Term Care and that is covered by:
1) your savings or
2) Long Term Care insurance or
3) government benefits after you have spent your assets down (Medicaid or VA benefits.)
This information is eye opening for a lot of people who come to me.
I mention this so that you consider learning all that you can about Long Term Care. It is more than just buying Long Term Care insurance. It is thinking about all of your preferences and discussing them with your family. It is preparing your home for successfully aging in place, learning about your housing options should you decide you no longer want to live at home, learning about how you can take care of yourself to prevent falls and other action steps that you can take so that you have a long and enjoyable retirement. Planning in advance gives you control and confidence versus making hurried decisions in a crisis. A terrific resource for learning about Long Term Care is www.LongTermCare.gov.
The information below is copied and pasted from an educational resource that I have access to called Forefield Broadridge, I hope you find it helpful.
Housing Options for Older Individuals
By definition, estate planning is a process designed to help you manage and preserve your assets while you are alive, and to conserve and control their distribution after your death according to your goals and objectives. But what estate planning means to you specifically depends on who you are. Your age, health, wealth, lifestyle, life stage, goals, and many other factors determine your particular estate planning needs.
For example, you may have a small estate and may be concerned only that certain people receive particular things. A simple will may be what you need. Or, you may have a large estate, and minimizing any potential estate tax impact is your foremost goal. Here, you’ll need to use more sophisticated techniques in your estate plan, such as a trust. There are, of course, other considerations besides the size of the estate that would determine the best course of action; complexity of your situation and desire for privacy for example.
To help you understand what estate planning means to you, the following sections address some estate planning needs that are common among some very broad groups of individuals. Think of these suggestions as simply a point in the right direction, and then seek professional advice to implement the right plan for you.
Since incapacity can strike anyone at anytime, all adults over 18 should consider having:
- A durable power of attorney: This document lets you name someone to manage your property for you in case you become incapacitated and cannot do so.
- An advance medical directive: The three main types of advance medical directives are (1) a living will, (2) a durable power of attorney for health care (also known as a health-care proxy), and (3) a Do Not Resuscitate order. Be aware that not all states allow each kind of medical directive, so make sure you execute one that will be effective for you.
Young and single
If you’re young and single, you may not need much estate planning. But if you have some material possessions, you should at least write a will. If you don’t, the wealth you leave behind if you die will likely go to your parents, and that might not be what you would want. A will lets you leave your possessions to anyone you choose (e.g., your significant other, siblings, other relatives, or favorite charity).
You’ve committed to a life partner but aren’t legally married. For you, a will is essential if you want your property to pass to your partner at your death. Without a will, state law directs that only your closest relatives will inherit your property, and your partner may get nothing. If you share certain property, such as a house or car, you may consider owning the property as joint tenants with rights of survivorship. That way, when one of you dies, the jointly held property will pass to the surviving partner automatically.
For many years, married couples had to do careful estate planning, such as the creation of a credit shelter trust, in order to take advantage of their combined federal estate tax exclusions. For decedents dying in 2011 and later years, the executor of a deceased spouse’s estate can transfer any unused estate tax exclusion amount to the surviving spouse without such planning.
You may be inclined to rely on these portability rules for estate tax avoidance, using outright bequests to your spouse instead of traditional trust planning. However, portability should not be relied upon solely for utilization of the first to die’s estate tax exclusion, and a credit shelter trust created at the first spouse’s death may still be advantageous for several reasons:
- Portability may be lost if the surviving spouse remarries and is later widowed again
- The trust can protect any appreciation of assets from estate tax at the second spouse’s death
- The trust can provide protection of assets from the reach of the surviving spouse’s creditors
- Portability does not apply to the generation-skipping transfer (GST) tax, so the trust may be needed to fully leverage the GST exemptions of both spouses
Married couples where one spouse is not a U.S. citizen have special planning concerns. The marital deduction is not allowed if the recipient spouse is a non-citizen spouse (but a $149,000 annual exclusion, for 2017, is allowed). If certain requirements are met, however, a transfer to a qualified domestic trust (QDOT) will qualify for the marital deduction.
Married with children
If you’re married and have children, you and your spouse should each have your own will. For you, wills are vital because you can name a guardian for your minor children in case both of you die simultaneously. If you fail to name a guardian in your will, a court may appoint someone you might not have chosen. Furthermore, without a will, some states dictate that at your death some of your property goes to your children and not to your spouse. If minor children inherit directly, the surviving parent will need court permission to manage the money for them.
You may also want to consult an attorney about establishing a trust to manage your children’s assets in the event that both you and your spouse die at the same time.
You may also need life insurance. Your surviving spouse may not be able to support the family on his or her own and may need to replace your earnings to maintain the family.
Comfortable and looking forward to retirement
If you’re in your 30s, you may be feeling comfortable. You’ve accumulated some wealth and you’re thinking about retirement. Here’s where estate planning overlaps with retirement planning. It’s just as important to plan to care for yourself during your retirement as it is to plan to provide for your beneficiaries after your death. You should keep in mind that even though Social Security may be around when you retire, those benefits alone may not provide enough income for your retirement years. Consider saving some of your accumulated wealth using other retirement and deferred vehicles, such as an individual retirement account (IRA).
Wealthy and worried
Depending on the size of your estate, you may need to be concerned about estate taxes.
For 2017, $5,490,000 is effectively excluded from the federal gift and estate tax. Estates over that amount may be subject to the tax at a top rate of 40 percent.
Similarly, there is another tax, called the generation-skipping transfer (GST) tax, that is imposed on transfers of wealth made to grandchildren (and lower generations). For 2017, the GST tax exemption is also $5,490,000, and the top tax rate is 40 percent.
Whether your estate will be subject to state death taxes depends on the size of your estate and the tax laws in effect in the state in which you are domiciled.
Elderly or ill
If you’re elderly or ill, you’ll want to write a will or update your existing one, consider a revocable living trust, and make sure you have a durable power of attorney and a health-care directive. Talk with your family about your wishes, and make sure they have copies of your important papers or know where to locate them.
Perhaps you own a timeshare, and perhaps to add further complication, it is in another state. A good estate plan is important to help you consider who will inherit the time share and responsibility for the ongoing maintenance fees. Different states have different rules about settling an estate with timeshare properties. Is it better to let it be probated? Or is it better to title it in a Trust? There are pros and cons to each approach and it needs to be considered based on the type of timeshare, dollar value, amount of ongoing maintenance fees, who will pay the fee, and how the fee would be paid.
One’s estate plan needs to be customized to one’s circumstance and wishes. Work with an attorney who specializes in the area of estate planning due to the complexity of this area of law, rather than someone who also fixes tickets, sets up LLC, etc. Just like a family doctor is an important part of your healthcare routine, you need to know when it is time to see a specialist. In law, estate planning is an area of specialty.
Portions of this blog post are from an article prepared by Broadridge Investor Communications Solutions, Inc. Copyright 2017 But, I just had to add my own two cents!
2013 Garrett Planning Network Retreat
The Garrett Planning Network 13th Annual Retreat was recently held in Kansas City, Missouri. I am a member of the Garrett Planning Network. It is a group of about 300 financial planners that offer financial planning on an hourly basis, each member owns their own firm. I have written about the Garrett Planning Network before.
I attended the conference and earned continuing education credits by going to various educational programs, which I need so that I can keep my designations and licenses such as:
- CERTIFIED FINANCIAL PLANNER™
- CHARTERED RETIREMENT PLANNING COUNSELOR℠
- NAPFA Registered Financial Advisor
During the four day conference I attended various educational programs such as:
- State of the Industry
- The 7Twelve Portfolio: A Better Balanced Portfolio
- Long Term Care Planning – Past Present Future
- Estate Planning Update
- And others
Ron Rhoades, JD, CFP ® of ScholarFi, Inc., gave one of the Keynote addresses on the state of the Industry: Will Fiduciary Duties be expanded – by the DOL or the SEC? In the fast-paced presentation, professor Rhoades covered various trends about the CFP Board, marketing of financial services and future effective business models.
Craig L. Israelsen, Ph.D. gave a keynote address on the 7Twelve Portfolio: A Better Balanced Portfolio. Laurence B. Siegel, another keynote speaker, spoke on Wake up and Smell the Coffee! Investors are Poorly Prepared for Retirement – A Balance Sheet Solution.
Throughout the year, the Garrett Planning Network, has three or four conference calls each month. One of the most beneficial outcomes of my annual trip to this retreat, is getting together with this group in person. On Thursday I was with a group of Garrett Planning Network members and Sheryl Garrett as Sheryl rang the closing bell at the BATS Global Markets stock exchange, the third largest exchange in the world. We took a tour of the exchange. It was inspiring to learn about the volume of trades that goes through there.
Another a highlight for me, is that I met Gail Marks Jarvis and she signed a copy of her new book for me. She is a very knowledgeable journalist for the Chicago Tribune and really roots for the consumer. One discussion point that really connected with me was something she mentioned at the book signing table. She talked about the fact that investors do not care about percentages they care about dollars. Their dollars. I agree wholeheartedly. It is something that I have kept in mind for years when I talk with someone about what allocation model is best for them.
Garrett Planning Network is a terrific group of professional financial planners who, like me, work with clients on an hourly basis. We share ideas and act as a resource for each other all year, so it is so nice to get together once a year and see each other again.