Paul R. Tierney Law

Estate Planning Attorney Can Help Deal with Sibling Rivalry

“The problem is that my parents want to designate me as their power of attorney, for both health care and financial decisions, since I live in their community. Unfortunately, my siblings feel slighted.”

The reader who posed this scenario is not alone in facing siblings who live far away but feel like they are not being included in their parent’s plans. For this family, one sibling lives 500 miles away and another lives 800 miles in the opposite direction. The one daughter who lives in the same community is the logical choice for power of attorney. What can be done?

According to the Faribault Daily News article “Attorney can smooth path for families making legal plans,” the problem likely has its roots in sibling rivalry, since it’s an emotional response to a sensible decision.

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

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

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

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

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

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

If you’ve been putting off making decisions about your estate plan because of worries about hurt feelings, make an appointment to meet with an estate planning attorney and discuss speak a family meeting. There are few scenarios that experienced estate planning attorneys haven’t seen. They will know how to handle it best, so that your plan is completed, your family is protected and hurt feelings are soothed.

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

Fiscal Words of Wisdom from One Who’s Been There, Done That

“There is no doubt that, for the most part, parents are much more involved with their children and their children’s more numerous activities, than parents were when I was growing up.”

If this describes you and your kids, then you need to prepare yourself for the adjustments that happen when the last child leaves the house. It can be emotionally and financially challenging, according to the Daily Messenger in the article “John Ninfo: Some advice for empty nesters”

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

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

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

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

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

Are you finding yourself with a lot of free time? We don’t often ask ourselves the important questions, like “What matters to me?” and “How do I want to be remembered?” Many people find the answers to those questions in service to others. If you’re not already volunteering with an organization, find the ones that resonate with your values and get involved.

Don’t immediately start on expensive home renovations or decorations. Give yourself time to adjust to a quieter house and think about where you want to invest those resources before spending. A redecorating project is fun but may be making yourself busy and filling time. The project may not actually be affordable.

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

You Can Age in Place but You Need to Plan

“Many homeowners plan to stay in their homes over the long-term, and some may plan to live independently at home, rather than moving into a retirement community, if possible.”

Aging in place is what most people hope for as they enter their 60s and 70s.  However, to make it a reality, there is a need to plan, according to the article “BBB On Homes: Focus on several things when aging in place,” from LMTonline.com. The Centers for Disease Control and Prevention define aging in place, as the ability to live in one’s own home and community safely, independently and comfortably regardless of age, income or ability level.

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

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

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

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

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

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

If you are considering how to remain at home, make sure to speak with family members, so they are aware of what your wishes are. With their support and if you are financially able to do so, it may make a big difference in the quality of your life.

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

Suggested Key Terms: Aging in Place, Safety, Emergencies, Technology, Budget

 

Fiscal Words of Wisdom from One Who’s Been There, Done That

“There is no doubt that, for the most part, parents are much more involved with their children and their children’s more numerous activities, than parents were when I was growing up.”

If this describes you and your kids, then you need to prepare yourself for the adjustments that happen when the last child leaves the house. It can be emotionally and financially challenging, according to the Daily Messenger in the article “John Ninfo: Some advice for empty nesters”

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

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

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

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

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

Are you finding yourself with a lot of free time? We don’t often ask ourselves the important questions, like “What matters to me?” and “How do I want to be remembered?” Many people find the answers to those questions in service to others. If you’re not already volunteering with an organization, find the ones that resonate with your values and get involved.

Don’t immediately start on expensive home renovations or decorations. Give yourself time to adjust to a quieter house and think about where you want to invest those resources before spending. A redecorating project is fun but may be making yourself busy and filling time. The project may not actually be affordable.

The empty nest presents many new opportunities for a fresh start. Use them wisely.

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

Business Owner Without an Estate Plan? Better Start Planning!

“There is a lot to think about, when business owners begin estate planning.”

As business owners start thinking about the most valuable asset that they own, they need to make some major decisions about their estate plan: do they want to pass the company to the next generation or sell it? In both cases, says Smart Business in the article “Questions for business owners to consider when estate planning,” starting the process of planning needs to begin early to ensure a smooth transition.

If the owner waits until illness or disability occurs to begin planning, chances are good that it will be too late.

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

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

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

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

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

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

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

Speak with an estate planning attorney about your plans for your business to ensure that a successful plan aligns with your estate plan.

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

Making Social Security Work with Your Retirement Accounts

“Most Americans enter retirement age with access to Social Security benefits. Many people also have Individual Retirement Accounts, including those that were funded by transferring money from workplace 401(k) plans.”

One trick to a successful retirement is to make your Social Security benefits coordinate optimally with your Individual Retirement Accounts (IRAs), says AZ Central in the article “Retirement planning: Connecting the dots between Social Security and IRAs.”

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

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

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

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

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

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

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

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

Forget That 4% Withdrawal Rule and Instead, Focus on Flexibility

“There is a longstanding 4% rule of thumb that was developed in the mid-1990s, outlining how much a person could safely withdraw from retirement savings each year and still have a nest egg to last a lifetime (aka 30 years).”

Scratch that rule, advisors are now saying, because there are too many other factors to consider. The old 4% rule, reports Forbes in the article “Here’s How to Refresh Your Retirement: The 4% Rule of Thumb,” doesn’t work anymore, in light of increasingly high healthcare costs, jobs that can be done well into one’s later years and a longer life expectancy.

It is now thought that the 4% rule is a decent base line.  However, you’ll need to go deeper into the details to plan for your retirement. Your spending also has a lot to do with what you expect from retirement and how expensive a lifestyle you choose.

One key factor today is tax-deferred investing. The importance of being taxed at the highest rate versus paying a lower tax rate can be misleading. Many people defer taxes on their investments, because they don’t want to pay 30% to 40% income taxes when they could defer to a higher bracket, if tax laws change.

Some are considering investment in single family rental properties. If you buy a rental house with a small capital investment, the house will ideally appreciate over time on a tax-deferred basis. Owners benefit by depreciating expenses on their tax returns. The single-family rental home can be paid off in 15 years to 20 years and create income for the owner—predictable income that could also increase from year to year.

Another strategy is to create an investment portfolio that combines diversified stocks and high-quality fixed annuities, paired with a systematic withdrawal plan and a built-in buffer strategy to reduce risk in the case of severe stock market swings.

One advisor noted that if a retiree today relies on a traditional 60/40 stock/bond portfolio, they could be looking at a financial disaster. The yields on bonds are at historic lows and a 4% withdrawal is just asking for trouble.

An effective tax reduction strategy has the potential to raise a retiree’s safe withdrawal rate even higher.

The best advice is to have a plan in place that works for the lifestyle that you and your spouse want and being prepared to adjust, if necessary. Your plan may include working, until you both reach full retirement age, working part time during retirement, moving to a location that is more affordable or aging in place.

Your plan should include putting your estate plan in place, by working with an experienced estate planning attorney. At the very least, you’ll need a will, power of attorney and a medical directive. Depending upon your situation, you may need more complex planning tools.

Reference: Forbes (Aug. 7, 2018) “Here’s How to Refresh Your Retirement: The 4% Rule of Thumb”

No Kids? You Need a Plan for Aging

“Choosing an assisted living facility can be frightening prospect for anyone.  However, the fear can be greater for people with no kids to help them through the process.”

When you don’t have kids or close family members, making decisions about an assisted living facility can be lonely and daunting, often leading people to delay planning. For many people, says Financial Planning in a recent article “Planning challenge: aging clients, no kids, assisted living required,” just the thought of moving into an assisted living facility, means they are entering a dark tunnel or, as some say, heading into God’s waiting room.

The challenge is often the same for people whose adult children live far away or those who are not involved with their family. In coming decades, more Americans will find themselves in a similar situation, according to a 2013 study by AARP’s Public Policy Institute.

While most elderly people receive some care from family members, the number of those who are able and willing to help, is not likely to keep pace with increasing demand, the study said.

In 2010, the caregiver support ratio was more than seven potential caregivers for each person in the high-risk years of 80 and up. But by 2030, this ratio is projected to drop to 4 to 1, and will fall even further in 2050, when the last group of baby boomers enters the later years of life.

What can be done?

Start planning early, as early as 65. The earlier you begin examining options for assisted living, visiting facilities and getting to know what you want and don’t want, the better you’ll be able to decide, when the time comes.

Have your estate plan in place. Many facilities require potential residents to be able to demonstrate that their estate plan is done, and all their documents are in order.

What amenities do you want to live near? For some people, being able to visit museums and cultural offerings is an important part of their lifestyle. Others require being closer to established healthcare facilities. Know what matters now and what will matter 10 years from now.

Meet the people who work at the facility. Don’t just talk to the sales staff. Talk to the people in the residence, those who work in the cafeterias, etc. The sales staff will paint one picture.  However, those who work there, are the people you will be dealing with on a daily basis.

Consider buying in before you move in. If the facility has a long waiting list, it may make sense for you to preserve a spot on the waiting list for when you have to move in. Make sure to do all your financial diligence to be sure the deposit is refundable and to be guaranteed to be returned.

Think positive. Having kids can be a double-edged sword. It’s great to have family.  However, with no kids, you are free to go where you wish, with no kids doing battle over where or how Mom or Dad should live.

Reference: Financial Planning (Aug. 8, 2018) “Planning challenge: aging clients, no kids, assisted living required”

Push Back on Elder Abuse with Good Estate Planning

“A Jamaica man was charged with tricking his 101-year-old neighbor into handing over the deed to his house last week. A trio of Maspeth thieves pleaded guilty to posing as grandchildren and even recruiting kids to rob senior citizens’ homes in July. In Flushing, a man allegedly begged an elderly victim to wire him $41,000 to post non-existent bail in the Dominican Republic.”

These are just three out of many elder abuse cases that have made their way to the Queens (New York) County Criminal Court in recent weeks, reports the Queens Daily Eagle in its article “Nuanced Directives, Power of Attorney Can Stem Elder Abuse.” These cases of elder abuse, fraud, and predation are reflective of a far larger problem.

As this borough of New York ages, the instances of predatory behavior and outright scams are getting worse. Predators often start out as well-intentioned caregivers.  However, they then start to take advantage of the senior under their care. They may start as someone who comes every day to check on the senior, helping with bills and then they see the senior’s assets. Sometimes they begin thinking they are entitled to some or all the senior’s assets.

Other types of abuse include stealing deeds to homes, when younger people establish seemingly caring relationships with elderly people, marrying them and then stealing their money while isolating the victims from their families. This is sometimes called “granny-napping,” where the caregiver manipulates the senior and turns them against other loved ones or former caregivers.

Cases like this turn to heartbreak for genuine, caring family members. The abuser poisons their loving relationship with a parent or grandparents.

One way to stem this abuse, is to ensure that older adults have advanced directives before something occurs. The estate planning or elder law attorney can tailor the document, so the person does not forfeit their rights or property, while putting legal protection in place.

What needs to be understood is this: the person who signs the document and becomes a senior’s representative has a fiduciary duty to act in the best interest of the person. If they breach that duty, there are legal consequences.

Bar associations work with attorneys across the country to help them in identifying and stopping elder abuse. The attorneys work with people in the healthcare field and in real estate, two areas where elder abuse occurs.

When an attorney suspects that elder abuse is taking place, the attorney has an option not to represent the agent and refer a case for guardianship on the grounds that the adult is being abused.

In markets where real estate values have skyrocketed, another real estate scam is for property hunters to go to Surrogate’s Court and find out who has died and who has inherited their estate. They approach heirs they deem to be financially or emotionally vulnerable and coax them into selling their property, usually for far below market value.

Putting an estate plan in place, can protect seniors from elder abuse. Speak with an estate planning attorney, to make sure that you or your loved ones are prepared for these scenarios.

Reference: Queens Daily Eagle (Aug. 8, 2018) “Nuanced Directives, Power of Attorney Can Stem Elder Abuse”

Protect Your Retirement from These Threats

“Four types of expenses can wreak havoc with your retirement.”

Retirement is a balance between enjoying your golden years, taking good care of your health and balancing your finances, so you don’t run out of income too early. However, as reported by MD Magazine in the recent article “Four Big Retirement Threats and How to Protect Yourself,” there are challenges ahead, some of which you can control, others requiring preparation.

Threat One: Premature death of a spouse and loss of Social Security or pension income. The loss of one Social Security check can have a significant impact on the household’s income. This is also true with the loss of a private pension. Both spouses need to be aware of how their retirement income will be generated and what will happen, when one spouse passes away.

Life insurance can be used to make up for the lost income. If you are young enough, buy term insurance. If you are older, consider cash-value policies, like whole life. Make sure that both spouses are familiar with household finances. Put together a list of your checking, savings, investment and credit card accounts.

Threat Two: Healthcare Costs. Medicare simply does not cover everything. Even a Medicare Advantage plan doesn’t cover everything. That includes long-term care, dentistry, vision care, hearing aids, eyeglasses or private nursing. There’s a “donut hole” in prescription coverage, so if you need pricy drugs you’ll need to budget at least $5,000 annually. If you underestimate the cost of healthcare, you could go through your medical budget fast.

Perfect health at 55 is no guarantee for what’s to come.

One solution is making the most of a Health Savings Account (HSA). You can save for future medical expenses and get a tax deduction for contributions. Even better—there’s no income tax on withdrawals for qualified medical expenses. Check with your employer, since HSAs are usually part of an employee benefits plan. You must have a high-deductible heath plan and can’t be on Medicare to qualify for an HSA.

Threat Number Three: Inflation According to the U.S. Bureau of Labor Statistics, inflation has averaged about 4% annually over the last 50 years. In 20 years, today’s $1 will be worth only 46 cents. Make sure your investment portfolio is diversified. Remember that your retirement could last several decades, so it may not be wise to abandon equities during retirement.

Threat Number Four: Outliving Your Savings. This sounds like a good problem, but it is still a problem. The longer you live, the longer you are expected to live. According to the IRS life expectancy tables, a 30-year-old can expect to live to age 83.  However, if you are 65 years old now, you can expect to live until age 86. The solution is to do periodic planning to make sure your retirement accounts and investments are keeping up with your living expenses. Give yourself a cushion, in case you live far past your expectations.

Reference: MD Magazine (Aug. 2, 2018) “Four Big Retirement Threats and How to Protect Yourself”

Life and Death Have Both Gotten More Complicated

“Death isn’t what it used to be. Write a will, put stock certificates and the deed to your home and a few other pieces of paper in a safe deposit box and you were set for life for the hereafter.”

Estate planning must now include intangible assets that didn’t exist just a few years ago, as well as those that have been around since people started owning private property. Today, says Forbes in the article “Estate Planning for Crypto And Other Digital Assets: What You Need to Know,” there are new kinds of property and new laws that govern them.

Some of the old rules still apply and you need a will. One of the things in that will, needs to be naming an executor who will be in charge of ensuring that your assets are distributed, according to the wishes you state in your will. When it comes to digital assets, things get a little tricky.

The hardest part of digital assets for many people, is how to give access to your digital property. The law has changed. If you own cryptocurrency, you’ll need to list your “crypto keys,” so your executor and heirs can know what is in your estate and be able to access it.

You may need to educate them, so they understand what the assets are, the location of the keys and access control that you use for security. You probably know access control as PINS, passphrases, multisignature or timeclock requirements.

The challenge is, if you die and no one has access to your cryptocurrency keys, your heirs may never be able to access them. They’ll need to know what exchanges you use (Bitcoin, Ethereum, and others) and a list of the digital wallets you own for each.

Most heirs want to sell the crypto property quickly, since the currency is volatile. No one wants to be criticized for losing substantive value in the estate, because they didn’t move quickly enough.  They also don’t want to be brought to court, for failing to look out for the fiduciary interests of the estate.

You’ll need both the proper legal planning and technical planning.

Most states with laws about digital assets, have adopted a model that was written to include things that have not been invented yet.

Electronic signatures on wills, is another digital issue entering the estate planning arena. Most estate planning attorneys are not enthusiastic about this.  However, the change is coming, says an attorney on the drafting committee of the Uniform Law Commission.

National College of Probate Judges President Tamara Curry says she expects that judges are going to have to get up to speed on crypto assets in the next three to five years, since courts will become inundated with estates that include crypto currency and other digital assets.

Resource: Forbes (Aug. 14, 2018) “Estate Planning for Crypto And Other Digital Assets: What You Need to Know”