Klitzman Law Group, PLLC

You Never Know When You’ll Need an Advanced Directive

“Advance care planning is making preparations and decisions about the medical care you want to receive, if you become unable to speak for yourself.”

Talking with your family and your physician ahead of time about what you would want if you should become incapacitated, is a difficult but necessary conversation, reports The Herald News in the article “Being Prepared: Advanced Directives.” An Advanced Directive is a key part of your estate plan. If you have reached the age of majority (age 18 in most states), then you need to have this document.

An estate planning attorney can help you ensure that you have an Advanced Directive in place which conveys your wishes to your loved ones. Discuss this ahead of time and let your family members know what you would want to happen in advance.

Select a person you know and trust to be your healthcare agent. Tell them you have selected them to serve in that role. Don’t let this be a surprise to them at the last minute. They will need to fully understand your wishes and be willing to carry them out.

Be as specific as you can about what kind of treatment you would want and which you would not. That includes medical ventilation, a feeding tube, kidney dialysis and other treatments.

Do you want to be resuscitated if you stop breathing, or have CPR performed if your heart stops working? You’ll want to have a DNR—Do Not Resuscitate—if you don’t want extreme measures to be taken to keep you alive.

Once you have made your decisions, meet with an estate planning attorney to complete a written advanced directive.

States have different sets of rules regarding advanced care directives, so an estate planning attorney in your state of residence is necessary.

 You should keep your advanced directive and DNR document, where someone can get them if an emergency occurs. Do not give it to a relative who lives two states away—they will not get to you in time. Be sure that everyone involved with your healthcare has a copy. This includes your primary care physician. Ask that your directive be maintained in your official medical file.

If you are wondering how or when to have this conversation about a loved one’s end-of-life preferences, the answer is now. Start by sharing your own wishes and then ask them to share theirs. Ask if they have made the proper preparations for their wishes to be carried out and discuss what must happen to have their wishes followed.

It’s not the happiest conversation you’ll ever have.  However, if an emergency occurs, your loved ones will have peace of mind knowing they did what you wanted. You’ll also have peace of mind.

Resource: The Herald News (Aug. 10, 2018) “Being Prepared: Advanced Directives”

Suggested Key Terms: Advanced Care Directive, End-of-Life Care, DNR, Do Not Resuscitate, Estate Planning

So, You Think You Can Retire?

“The most common need of those preparing to step into retirement isn't what you think: it's confirmation that all the hard work, discipline and saving was enough.”

People getting ready to retire really want to be reassured that they did a good job and were good stewards of their money, according to Investopedia’s article “Determining If You’re Prepared for Retirement.” They also want confirmation that the retirement assets they’ve built over a lifetime will last for the rest of their lives and that they’ll be able to live in comfort.

Commonly asked questions are:

• Am I saving enough, or did I save enough?
• Can I retire, or did I make a mistake and retire too early?
• Were my investment decisions the right ones?
• How am I doing, compared to my peers?

The answers to these questions are important, but like so many things in life, there is no “one-size-fits-all” answer. Just because you’ve accumulated six, seven or even eight figure retirement savings, doesn’t mean you’ve “won” the retirement game. In this case, size doesn’t always matter.

One of the key factors to a successful retirement is your income to expense ratio. Can you generate enough income from all sources, without drawing down too much from your portfolio?

If you have a small to non-existent portfolio, but you have a good-sized pension, maybe you don’t need such a big portfolio. If you live very simply, it’s possible that Social Security benefits and modest withdrawals from your investments might take care of your needs.

Remember that just because you have a large portfolio, does not mean you don’t risk running out of money during retirement. If you spend lavishly on first-class vacations, drive luxury cars and live in a house that costs a fortune to run, you can easily get yourself into a tight spot.

Take a long hard look at all sources of income to determine how long your portfolio will last. You should include Social Security, pensions, retirement accounts and any other sources of income. It is important to figure out how much income you’ll need on annual and monthly basis. You’ll then have a better sense of whether you are prepared for retirement.

Don’t forget to prepare an estate plan, unless you have already done so. A will, power of attorney, healthcare directive and other documents will help protect you and your loved ones. You need an estate plan, regardless of the size of your portfolio. A qualified estate planning attorney can help you prepare this part of your retirement.

Resource: Investopedia (July 19, 2018) “Determining If You’re Prepared for Retirement”

Suggested Key Terms: Retirement, Pension, Social Security, Estate Plan

Why Is a Power of Attorney So Important?

“……we often receive community questions surrounding powers of attorney (POA), so we decided to take a look at some of the most common misconceptions surrounding a POA.”

Most people understand the basic concept of a last will and testament: a document that directs how assets are to be distributed after someone dies. However, according to an article from A Place For Mom, “5 Misconceptions About a Power of Attorney,” there’s a lot of confusion over this legal document.

Misconception #1–You can sign a power of attorney, even if you are legally incompetent.

Not true. This is one of the most common misconceptions. In fact, if you have a document from a medical doctor that says a person is not competent, that person is no longer able to sign any legal documents. Many people generally think about what they need to do, i.e., accessing a bank account, when an elderly parent can no longer do so.  However, if Dad lost his legal capacity just before a power of attorney or living trust was signed, that’s no longer an option. You’ll have to go through a guardianship or conservatorship proceeding through the court to have any control over Dad’s assets.

Misconception #2—You can find a power of attorney document online.

You might find such a document online but it most likely will not be suited to your circumstances. You need to have a power of attorney custom drafted, so it is legal in your state and addresses your family’s needs. Many online documents end up being useless. It’s a big risk to take.

Misconception #3—A power of attorney lets the agent do whatever they want.

The agent under a power of attorney has a legal and fiduciary duty to make decisions in the best interests of the person who named them as power of attorney. They have not been handed a free pass; on the contrary, they have a big responsibility to do the right thing.

Misconception #4—There is one power of attorney.

This is why an estate planning attorney is needed for the power of attorney. There are two main types: a general power of attorney and a limited or special power of attorney. They are named correctly: a general power of attorney allows for buying or selling property or managing assets. A limited or special power of attorney refers to a specific transaction or task. Which one you need, depends on the laws of your state and the circumstances.

Misconception #5—A power of attorney survives death.

All powers of attorney terminate on death. Once a person has passed, so has the authority for their agent to act on their behalf. A durable power of attorney allows the agent to act, in the event of incapacity but not death.

Power of attorney is an important part of an estate plan and requires the specific knowledge of an estate planning or elder law attorney. Don’t wait until it is too late for a family member (or yourself) to have this document prepared and signed.

Resource: A Place For Mom (July 11, 2018) “5 Misconceptions About a Power of Attorney”

Suggested Key Terms: Power of Attorney, Incapacity, POA, Guardianship, Conservatorship

Estate Planning Fundamentals You Need to Know

“It's easy to put off because it can be morbid and often doesn't kick in until late in our lives, but it's an important piece to be thinking about for those of us who want to make sure our families are provided for.”

A well-prepared estate plan can help you and your family reach many different goals. You may know that your estate plan provides for your spouse and children, including what should happen to them, if they are minors and need someone other than you and your spouse to rear them. In addition, says the Brainerd Dispatch in its article “Wealth Column: Estate Planning Basics,” an estate plan can also be used to dispose of the family business, minimize tax liability and empower an executor and trustees to act on your behalf.

First, you’ll need a will, which is the basic tool for estate planning. It prevents two very expensive and stressful issues: managing your wishes for your estate and possibly losing hefty sums through unnecessary taxes. However, that’s just the start.

You may also need trusts, depending on your family’s situation. You’ll want to have life insurance policies with beneficiaries. Life insurance proceeds are not governed by the will, so your heirs will receive any funds directly or in trust. Benefits from retirement funds fall into this same category. That’s why making sure that your beneficiary designations are up-to-date, is so important.

Working with a team of trusted advisors, is productive for most people. Remember that your estate plan touches on taxes and investments as well as your will, power of attorney and medical directive. Consider these steps to get your entire estate plan in order:

• Gather personal data about yourself and your family,
• Create a balance sheet of your assets and liabilities,
• Review your will and any existing trusts,
• Evaluate all estate tax options, such as the best method of disposing of your share of community property—considering the unlimited marital deduction and the use of tax-sheltered trusts,
• Consider the optimal way to distribute your retirement plan benefits,
• Calculate potential estate, gift and income tax liabilities,
• Determine the availability of liquid assets to meet potential estate expenses and taxes.

Once you have all this information together, you and your estate planning attorney can begin to put together a plan that will serve you and your family. Remember that an estate plan is not a one-and-done document. Over time, as your life and tax laws change, you’ll need to review the estate plan,  which includes beneficiary designations.

Resource: Brainerd Dispatch (Aug. 3, 2018) “Wealth Column: Estate Planning Basics”

Suggested Key Terms: Estate Plan, Will, Power of Attorney, Retirement Plan Benefits, Beneficiary Designations, Tax

There’s Always a First Time: Your First RMD

“If you have been stashing money away in an IRA, your money has been growing tax-free over the years. Of course, a deal that good, can’t last forever.”

The good news is, you’ve been able to grow your IRA over the years, and now it’s time for retirement. The not-so-great news: withdrawals from your traditional IRA are treated like taxable income, and you have to make Required Minimum Distributions (RMDs) every year, starting at age 70½, whether you need or want to or not, says Kiplinger in “When Do I Have to Take My First RMD?”

If you miss that deadline, be warned: penalties are expensive. How does half of your required withdrawal amount sound? It is bad enough to be sure you won’t miss this deadline!

It’s not as hard today to find out when you must take your RMD, although in the past this was challenging. There are online calculators that can help, and you can always ask your estate planning attorney, just to be sure. The IRS gives you a little wiggle room for that first RMD–until April 1 of the year that you reach age 70½. However, here’s the kicker: the second RMD is due on December 31 of that same year. Therefore, you might end up taking two RMDs in one tax year, which could make your tax bill bigger than you had expected. You may be tempted to defer taking the first RMD, but don’t. Take it by the first calendar year in which you turn 70½ and avoid that double-RMD whammy.

There are a few factors that could change your RMD. One of them—if your spouse is more than 10 years younger than you are and is named as the sole beneficiary on at least one of your IRAs—the RMD will be less than what some online calculators show.

If you discover that you missed your RMD, don’t delay trying to fix the error. Figure out how much you should have taken and remove that amount as soon as possible from the IRA.

File Tax Form 5329, “Additional Taxes on Qualified Plans (Including IRAs) and Other Tax Favored Accounts.” You can file this with your tax return or by itself.  if you are requesting that the 50% penalty be waived, payment does not have to be made when the forms are filed.

Last, attach a letter explaining what happened steps you’re taking to fix the error.

If you’re still working, you can delay taking RMDs from your current employer’s 401(k) until after you stop working in that job, unless you own 5% or more of the company. The important word here: current employer. You’ll have to take RMDs from prior employers, even if you’re still working. However, you might be able to delay your RMD, if your current employer lets you roll over money from other retirement accounts into the current employer’s plan.

After you’ve taken your first RMD, subsequent years get a little easier. They’re due by December 31.

This is too expensive a mistake to make. Talk with your estate planning attorney to make sure that you don’t miss the first RMD and your retirement accounts are aligned with your overall estate plan.

Resource: Kiplinger (July, 2018) “When Do I Have to Take My First RMD?”

Suggested Key Terms: RMDs, 401(k), Traditional IRA, Tax Penalties, Retirement Accounts

Judge Rules that Glen Campbell’s Kids Can Contest his Will

“Last week, a judge in Tennessee ruled that the three children can dispute the validity of the wills that excluded them from inheriting. They petitioned the court to certify that a contest to the will exists, on grounds of his alleged lack of capacity and undue influence.”

When Glen Campbell passed away, he intentionally left three of his children from his second marriage out of his wills. Three of his children have just won a court decision, reports Wealth Management.com in the article “Glen Campbell’s Kids Come After the Rhinestone Cowboy’s Estate.”

The two wills at the heart of the case are from 2001 and 2006. The 2006 will names Campbell’s fourth wife Kimberly, who is the executor of the estate, and five of Campbell’s other children as his beneficiaries. Campbell went public with his Alzheimer’s diagnosis in 2011, but it’s not known how far back his illness began. The legal burden facing his children: prove that he lacked the needed capacity to execute both wills.

If the will is deemed invalid because of lack of capacity or undue influence, the immediately preceding will is resurrected, said one estate planning attorney who is not affiliated with the case. The previous will probably disinherited them also, which is why they must prove the invalidity of both wills.

Kimberly has told a local newspaper that she would not challenge the kid’s right to contest the wills and the judge’s decision noted the lack of opposition. She has also filed a claim seeking reimbursement from the estate for more than $500,000 to cover the cost of his medical care.

It was also reported that one of his daughters, Debbie Campbell-Cloyd, has filed for a complete accounting of all payments made by the estate, as well as payments to and from a previously undisclosed bank account. She alleges that royalties that should have been deposited into an account controlled by Campbell’s estate, were instead deposited into this account, which is now controlled by Kimberly. The singer’s former manager has power of attorney over the account.

Multiple children from multiple marriages make estates complicated, even if you aren’t a legendary country music singer. For blended families, estate planning that includes family meetings can sometimes help prevent misunderstandings and estate battles.

Resource: Wealth Management.com (Aug. 2, 2018) “Glen Campbell’s Kids Come After the Rhinestone Cowboy’s Estate”

Suggested Key Terms: Wills, Lack of Capacity, Undue Influence, Executor, Alzheimer’s, Disinherited

 

Multigenerational Estate Planning

“After decades of establishing separate and independent households, U.S. families are increasingly opting for togetherness.”

A Pew Research Center analysis of census data found that in 2016, 20% of the U.S. population was living in multi-generational homes. That’s a record number and one that is expected to keep rising. In the article titled “How to Address Multigenerational Estate Planning Issues,” Financial Advisor Magazine asks what’s behind the numbers?

For some families, it’s college students moving back with mom and dad while they pay off student loans or newly married couples living with one set of parents while they save money to purchase a home of their own. New parents are recruiting their own parents to combine households, so child care and a stronger sense of family is created. In other families, having elderly parents move into their children’s home helps the seniors with aging issues.

In many instances, families add separate living quarters to their existing homes. States are addressing zoning issues that prohibited this kind of construction in the past.  

Pressures created by rising housing costs, housing shortages and demographics have all contributed to this new trend. How to navigate this kind of family “merger” requires a lot of planning, including estate planning. How will the property pass to the next generation? What about siblings who are not involved in the shared housing space? How should their portion of the inheritance be handled?

There are many ways to navigate the closer relationship with aging parents or childcare needs. Some elect to purchase a nearby condo where parents are living, so at some point the parents can move from their single-family home to an apartment. For others, the parents move to an apartment within the home, so their children and grandchildren can enjoy the larger living space.  

Whichever way your family choses to set up your residences, take the time to meet with an estate planning attorney who can help you work through the best way to set up the arrangement, including how property is titled and passes to the next generation, as well as making sure the estate documents like wills, trusts, power of attorney and health care directives are all completed.

Resource: Financial Advisor Magazine (July 31, 2018) “How to Address Multigenerational Estate Planning Issues”

Suggested Key Terms:Multigenerational, Estate Planning, Aging Parents,

College Students Need This Estate Planning Tool

“My son is leaving for college on the East Coast in August. Is there anything special I should consider, legally or financially, in preparing for this life change – both for my son and for me?”

This is an excellent question and it’s one any parent of a child going off to college and, for that matter, the parents of any young adult, should be asking their estate planning attorney. The simple answer, according to the article “Liza Horvath, Senior Advocate: Off to College,” from Monterey Herald: YES!

When college students go to off to a world of dorm living, classes and increased independence, many are on their own for the first time. If they are 18 or older, they are legally considered adults. If they become sick or injured while away, the rules of HIPAA, the Health Insurance Portability and Accountability Act, prohibit anyone from speaking with a doctor, gaining access to medical records or being informed of their status–even their own parents!

If your college admissions package did not include an Advance Health Care Directive and a HIPAA release form giving you permission to speak on behalf of your student, speak to doctors and to be part of any medical decisions. Your estate planning attorney will be able to draft those documents for you.

Make sure that your college-bound student also has a list of who they should contact in an emergency, including cell, home and work numbers and email addresses. This list should include their primary treating physician and a history of their immunizations, chronic conditions, medications and  other relevant medical issues.

This information can be stored in the cloud or on their phones.  However, if the phone is stolen or lost, so is a lot of sensitive data. Write it down on an old-fashioned piece of paper and keep a hard copy at home and one on your own computer, so it can be easily sent if necessary.

You should also consider having a power of attorney for finances and a directive to the college, so information on your student can be released to you. This will allow you to see the academic records and act on your child’s behalf on any legal matters.

If you have adult children, even those who graduated long ago, you may also to wish to have some of these documents prepared.  

Once you have the proper documents in place, you and your college-bound child student can focus on their new lives, furnishing a dorm room and picking out a new laptop!

Resource: Monterey Herald (July 28, 2018) “Liza Horvath, Senior Advocate: Off to College”

Suggested Key Words: College, Student, Power of Attorney, HIPAA, Advance Health Care Directive, Emergency

 

Single? No Kids? Who Should Inherit Your Assets?

“I know I want to give to family. I was advised to use a younger person, because all my siblings are older than me. I thought about using one older relative and a younger one, but I'm worried they won't come to an agreement.”

To whom will you leave your worldly goods, when there are no children and no spouses? This can be a challenge, says nj.com in “Single without kids? Who should be your heir?” The first thought is usually to benefit family members, and siblings and their children. But what if you are worried that the siblings will quarrel, or if they are all much older than you?

This is not an unusual situation and an estate planning attorney will be able to help you examine your options. You have several choices, although it may not seem that way at first glance.

Yes, start with considering family members. If you leave money to older siblings who are dependent upon programs like Medicaid, you might put their financial situation at risk. If the older sibling dies shortly after receiving the inheritance, then the money will be part of their estate.

If you decide to leave assets to your siblings and have a will properly prepared by an estate planning attorney, then the assets will be distributed according to the terms of the will, regardless of how the siblings feel about it. Is it likely that there will be a will contest? If no, then make an informed decision based on how you want your assets distributed.

There are other things that you can do with your assets. Consider making a charitable donation to an organization you have been involved with during your lifetime or one that shares your values and goals. A scholarship to your college or to a local community group would be greatly appreciated and may create a lasting legacy to your memory. You can also give with “warm hands,” which is making charitable donations while you are alive, to nonprofit organizations. That way you can enjoy seeing the impact of your gift, while you are alive.

Make sure to consider the tax ramifications of any estate plan. There may be an inheritance tax in your state that will have a significant impact on the inheritance. Will your heirs be able to afford that?

Sit down with an estate planning attorney and talk about what it is you’d like your estate to achieve after you’ve passed. You may also want to do some funeral planning at this time, so that your wishes for a funeral and your estate are carried out.

Resource:nj.com (July 20, 2018) “Single without kids? Who should be your heir?”

Suggested Key Terms: Estate Planning, Singles, Siblings, Inheritance, Charitable Donation, Tax

Maybe You’re Only a Little Retired Now

“Soon after Ilana Benet retired from her job as a labor and delivery nurse, it hit her: She missed the babies. Her employer missed her…. she quickly realized — within weeks — that she wasn’t ready for full retirement.”

Montefiore, a large hospital located in the Bronx, N.Y., is one of many organizations developing informal programs to rehire some retired employees. Administrators noticed that half of its nurses were nearing 50. It didn’t have a nursing shortage and wanted to prevent one. It now routinely brings back retired nurses on a freelance basis. It’s good for the hospital and the retirees, who can supplement their pensions.

As reported in The New York Times in an article titled “In a Tight Labor Market, Retirees Fill Gaps Their Previous Employers Can’t,” not every person who retires is ready to do so—and not every employer is ready to let them go. In a tight labor market, firms find recent retirees increasingly attractive.

This has become more common than at any other time since the Great Recession, says Kathleen Christensen, who funds research on aging and the American labor market at the Alfred P. Sloan Foundation.

There’s a shortage in many sectors, including construction and transportation, so the attitude toward older workers is changing.

One large northeastern power company is also bringing back retirees, using their years of experience to train younger employees. This company’s management deliberately stays in touch with retirees, allowing some to work part time and taking others on, as needed, for short term projects. Since they are brought back on as contractors, not employees, they continue to receive their pensions.

The boom in online shopping has had an impact on delivery services. UPS has organized a program to recruit retirees. Management sought to bring back retired workers and has also tapped the older workers in construction to help with new facilities that are being built.

In other words, when you retire, don’t be surprised if you’re asked to come back.

One thing to keep in mind if your retirement includes going back to work: how will your income impact your Social Security benefits and your overall retirement plan? Sit down with an experienced estate planning attorney to find out how your new life as a freelancer or independent contractor will impact your tax liability, your government benefits and your estate plan.

Who knew that working would make retirement fun again?

Resource: The New York Times (July 15, 2018) “In a Tight Labor Market, Retirees Fill Gaps Their Previous Employers Can’t”

Suggested Key Terms: Retirement, Social Security, Labor Market, Contractors