Klitzman Law Group, PLLC

What Happens When Only One Spouse Knows Everything?

“A lack of engagement can prove costly, but there are ways to bring the less-knowledgeable partner to speed.”

There are several reasons for one spouse not to be involved with the household finances: too busy, intimidated by numbers, or simply not interested. However, the cost of not knowing where the money is, how investments are structured, the state of retirement savings, or the daily details of how bills get paid, can be quite high, when one spouse is unexpectedly put in charge.

This recent article from The Wall Street Journal, “When One Spouses Handles Finances,” reminds readers that one spouse may not be involved because they are the main breadwinner working 12-hour days. However, for one family, the unexpected early death of the spouse, who managed the family’s finances led to a high-powered executive having to learn all about finances at the worst possible time in her life.

Spouses are urged to take a more active role in the family’s investments and to be certain they are comfortable with the family’s advisors. If they are both are not comfortable with the professionals handling their money and legal matters, it may be time for a change. If the change is made after a spouse dies, it should be seen as a move towards independence, and not a betrayal of the spouse’s legacy.

Studies conducted by financial service companies have found that despite gains in education and, to some extent, compensation, women still let their spouses handle financial decisions. Even millennial women, those born between 1980—1996 (roughly sixty percent), leave those investment decisions to their husbands.

Women are controlling more wealth and are more likely to divorce or outlive their husbands than at any other time in history, so taking the financial reins is very important.

Financial advisors are trying to bridge the gap. Some encourage spouses to create lesson plans, exploring one topic per session and then go to dinner afterwards (without the kids) to discuss wills, insurance and investment basics or whatever the topic of the week was. Others hold quarterly meetings.

It can be frustrating for one spouse to deal with a non-involved spouse, who either doesn’t want to learn or has trouble grasping some of the concepts. In that case, getting a non-related person involved might be a good tactic. Set up meetings with your estate planning attorney, financial advisor, and CPA that are geared to reviewing your family’s assets and estate plan, with the focus on bringing the non-involved spouse up to speed.

Make it personal and rewarding. It’s far more fun for someone to open their own “50^th Wedding Account” and learn by investing, than to get drilled on a textbook lesson. If one spouse dreams of travel, turn working together on budgets and investments with specific trips in mind into a motivating force.

Above all, be patient. Give the spouse time to learn, get engaged and not be defensive about their lack of knowledge. A willing partner, after all, will always learn more.

Reference: The Wall Street Journal (Oct. 22, 2018) “When One Spouses Handles Finances”

Suggested Key Terms: Investments, Retirement Planning, Budgets

Another Thing to Plan for Thanksgiving

“Don't brag about money, ask for a loan or have heated money talks at the holiday dinner table.”

Those are three topics that we recommend you steer clear of at the upcoming gathering of the clan for Thanksgiving. Another is politics, even if you are certain that everyone around the table shares the same viewpoints. Just as sensitive is: the topic of money, says this article from U.S. News & World Report titled “How to Handle Financial Conversations at the Thanksgiving Table.”

It’s not always easy when you’re gathering with cousins, uncles, aunts, sisters, brothers, in-laws, nephews, nieces and grandchildren. You want to share your good news about work, fun new purchases, vacations and other things that by their nature send a clear signal of a happy financial picture. However, if others are not enjoying such good fortune, you may be creating an uncomfortable, even hurtful, atmosphere.

Downplay your wealth or achievements. No one is saying you should not be proud of your accomplishments, but you may be seen as a selfish braggart. What if your relatives decide to ask for a loan? Do more listening than talking and keep your descriptions modest.

Don’t talk about your expensive toys. The family probably knows who at the table has a second home, the one luxury car that’s parked in the driveway and the designer clothes and handbags. If your shopping list includes a trip to Tiffany’s and everyone else is going to Walmart, tone it down.

If someone’s open about their struggles, be a good listener. Maybe you’ve heard the same story from cousin Bob for the last 20 years, or maybe Jill’s facing foreclosure due to a health crisis. They are sharing their stories and are probably not looking for the most successful person in the room to give them advice in front of a crowd. A sympathetic ear is more helpful. If you do want to help, have a conversation privately, away from the table or after Thanksgiving.

Say no to loans or business for family members at the holiday table. Be firm, be polite but decline. Explain that you want to keep the focus on the family. If there’s something of interest, you can speak about it another time.

Don’t do your family estate planning meeting at Thanksgiving. This is a very important meeting and it’s one you should have more than once every 10 years—every year is ideal—but not around the Thanksgiving table. Agree that this is something that needs to be done and set a date, if that works for your family. However, let everyone enjoy each other’s company on Thanksgiving.

Reference: U.S. News & World Report (Oct. 30, 2018) “How to Handle Financial Conversations at the Thanksgiving Table.”

Key Suggested Terms: Thanksgiving, Money, Achievements, Wealthy, Purchases, Holiday Shopping, Struggling, Loans, Estate Planning

Estate and Business Succession Planning: You Need Both

“As a business owner, you take steps to protect day-to-day operations. However, many business owners fail to consider how they will protect their business, when they are no longer able to work.”

The same personality traits that make a successful business owner, are not always the same ones needed to plan to sell the business. However, one of the most important things a business owner can do, according to the article from Northern Nevada Business titled “Protect your business through estate, succession planning,” is to plan for the future of their business and for their family.

The continuity of any business, when the owner leaves the business because it is sold or because of death, must be dealt with, so that the owner, family members and business partners have a plan in place.

An estate plan helps a smooth transition occur, if the owner should die unexpectedly. Even a basic plan that authorizes a partner or key employee to continue operating the business on a temporary basis, will serve to protect the value of the business and the good will of its customers.

It is not easy to decide who the successor will be, but it is one of the big decisions that must be made. If you simply name a spouse or a child who is not ready to take the helm, you could doom the business. If the family is involved with the business, you’ll need to give clear directions as to who will be responsible for what tasks.

If you’ve got adult children who have never worked in the business at all, and worse, never worked in the business together, you could be looking at the end of the business. Consider a plan where family members become “silent owners,” and key employees are given more authority. You’ll need to work with an estate planning attorney who has helped clients successfully accomplish this, so that family strife does not spill over into the business.

A valuation of the business will also have to be done by an experienced professional.

Some families use life insurance proceeds to provide the funds for a child, spouse or partner to buy out the other business partners, when the founder dies. This is also a way to provide assets to family members, who won’t receive any interests in the business.

Make sure that your estate plan aligns with your succession plan. A buy-sell agreement defines the exit strategy for partners and details what will happen to the business in the case of retirement, disability or death.

If no family members or partners want to take on a leadership role, you’ll need to identify a key employee and discuss with him or her the possibility of buying into the company. This can help foster employee retention and offers consistency during the transition.

Reference: Northern Nevada Business (Oct. 30, 2018) “Protect your business through estate, succession planning,”

Suggested Key Terms: Estate Planning, Business Succession, Valuation, Life Insurance, Partners, Key Employee

What Happens When You Stop Saving for Retirement and Start Spending?

“It’d be nice if saving for retirement was all we had to do. It turns out, we also need to decide on the best way to pull out our savings once we retire.”

When the time comes to start using the money you’ve devoted so many years to saving, things can get confusing. There are many different strategies for retirement withdrawals and, not surprisingly, an article from Nerd Wallet asks “Retirement Withdrawal Strategies: Which Should You Use?” Not surprisingly, the article provides a lot of helpful information.

Probably the best known is the 4% Rule. Published in 1994 by a retired financial planner, this number was said to be a safe annual withdrawal rate, after it was tested on the toughest financial crises in history, including the 1929 Great Depression. Using that rule, you withdraw 4% from your savings in the first year of retirement and then take out the same dollar amount, adjusted for inflation in the years that follow.

Let’s say you have $800,000 in retirement savings. You’d take out $32,000 for the first year. The next year, inflation is at 3%. Therefore, you’d take out $32,960 the next year. As long as half of your savings are invested in a portfolio that does better than 4%, you’re okay. However, this plan is also inflexible and doesn’t account for how spending patterns change or how markets dip.

Another approach is known as “Dynamic Withdrawals.” This comes in many different types, but the essence is that you change your withdrawal amount when things change, like investment returns. This approach lets you make sure your retirement accounts will last as long as you need them to. If your investments are not performing, it makes sense not to pull out more money. Or, if you had an emergency that required a lot of money in the previous year, you take out less the following year. The downside: this can get complicated.

There’s also the “Bucket Strategy.” You split up your savings into different types of accounts, based on your goals. It’s a very personal approach. For example, let’s say you set them like this: an emergency savings, living expenses and long-term savings. You might put six months (or years, depending on the health of your retirement accounts) into an emergency savings account. Then you’d put three years of living expenses aside, with one of the three years in a savings account and two years’ worth in a bank CD. Your longer-term savings would then go into stocks and bonds.

The idea is to spread out your risk across a number of different savings vehicles. You will have cash on hand, when the markets are volatile. You also don’t have to sell into a down market.

Whatever your withdrawal approach, don’t forget these basics:

Don’t forget about your tax burden. If you take money out of a traditional IRA or a 401(k), you’re going to need to pay income tax. That can be avoided with a Roth conversion. An estate planning attorney can help you with tax planning.

Review your plan annually. Like your estate plan, this is not a one-time situation. Life and laws change, and you will need to make changes too.

Look at other income sources. The withdrawal strategies don’t include Social Security or any other income sources, like part time work.

Eliminate as much debt as you can. That reduces fixed expenses, which can take a bite out of your retirement.

Be flexible. Adjusting withdrawals as you go, will give you much more control over your retirement funds.

Reference: Nerd Wallet (Oct. 31, 2018) “Retirement Withdrawal Strategies: Which Should You Use?”

Suggested Key Terms: Retirement Withdrawal Strategies, Traditional IRA, 401(k), 4% Rule, Dynamic Withdrawals, Taxes, Estate Planning, Savings

What Happens After You’ve Completed Your Estate Plan?

“Planning before you are in a dire situation allows you time to really think about what you want to do with your assets and how you want to handle your finances at the end of your life.”

Life can change in an instant. One minute you are wondering what to make for dinner, the next you are dealing with an emergency situation for yourself or someone you love. In the face of an emergency, like a devastating medical diagnosis, things that once seemed important become meaningless. That’s when many people start thinking about having an estate plan, as discussed in the article “The will and estate plan are done, what now?” from the Brentwood Home Page.

However, once the will and the estate plan are done, the process doesn’t stop, even in the face of an urgent situation. There are still tasks that must be done, and perhaps the most important one of all is talking with family members about the plan, where it is and what your wishes are.

Many families get started on their estate plan in the attorney’s office, discussing what they want to happen to their assets, who their executor should be and how they want their end-of-life decisions to be made. However, they find it difficult to discuss with their children, and as a result, when the first parent passes, the only one who knows what the plan is (and where it is) is the surviving spouse.

Will the adult children know where to find the documents, if the surviving spouse is so bereft that he or she is not functioning well? Will the surviving spouse or the children know what the next steps should be?

Will the person who was designated the executor, know that this is their role? That’s never a good thing to learn about at the last minute.

Once you’ve completed your estate plan and other related documents, don’t leave out this critical next step. The executor and those left when you (or your spouse) have passed have a big job ahead of them, and you don’t want to make it harder.

It can take months or sometimes years to settle an estate. Here are a few facts to be aware of:

• Wills and estate plans are not filed with the court before death. The estate planning attorney may have a copy, but the court will want the original documents.
• The executor will need original death certificates.
• An attorney, possibly the same one who created the estate plan, will be able to guide you through the settlement of the estate.
• Once the will is probated and the executor is appointed, beneficiaries will need to be named and creditors notified.
• The decedent’s property will need to be managed. This can be tricky, if he or she owned a business, rental properties or other assets that require on-going management.
• Final tax returns must be filed.

As you can tell, this is not a simple process. You may try to handle it on your own, but chances are you will save yourself from a good deal of stress and expensive mistakes by working with an estate planning attorney beforehand to create the estate plan, and afterwards, to help manage the estate and all of the related tasks.

Reference: Brentwood Home Page (Oct. 31, 2018) “The will and estate plan are done, what now?”

Suggested Key Terms: Estate Plan, Will, Executor, Probate, Surviving Spouse, Death Certificates, Tax Returns

Five More Years Makes a Big Difference: Stay the Course if You Can

“Postponing retirement can plump up savings and bolster Social Security checks.”

An increasing number of Americans aren’t ready to give up careers they still find rewarding at 65, according to an insightful article from Bloomberg Business News titled “Seventy Is the New Sixty-Five.” The gains from just working five additional years also make it worthwhile.

By continuing to work through their 60s and beyond, these older workers are not only giving their portfolios five more years of growth. They are also adding to their Social Security benefits and compressing the amount of time they’ll be drawing down from their savings.

A survey by CareerBuilder in 2017 found that half of U.S. workers over age 65 have no intention of retiring before age 70. While about a third of adults between the ages of 65 and 74 have full or part time jobs, the Bureau of Labor Statistics expects that number to jump by 2026. It’s a win-win-win, and for middle class Americans, it’s another form of longevity risk management.

Working for just a few more years, has been found to offer a bigger boost to retirement savings than saving more over the decades.

The downside? Not everyone is able to keep working past age 65. Some lose their jobs and find it hard to get hired again. While there is no longer a mandatory retirement age, age discrimination is still present in the workplace. Employers often push out older workers, eliminating their positions by “restructuring,” which lets them hire younger workers at lower salaries.

Others need to slow down their careers to care for ailing parents or spouses.

A recent survey by AARP found that 44% (!) of older job applicants were asked about age-related information by their potential employers, even though doing so is illegal.

However, the tight labor market has also led more companies to rely on older employees. People 55 and above are expected to comprise more than a quarter of the workforce by 2020. While companies are often reluctant to discuss ageism in the workplace, many have realized the value of the older worker.

One large corporation that makes industrial equipment, reports that a third of its workforce is currently over age 50, and many are choosing to stay into their 60s, especially those in white collar positions. Those who have technical experience and knowledge about products and can mentor younger workers, are especially important to the company’s continued growth.

Working a few more years can offer a bigger payout than saving more money during younger years. That’s according to a recent study from Stanford University. Here’s a hypothetical example: a 43-year-old in 2013, earning roughly $114,000 per year and putting 9% into a retirement fund. If she works until she is 68½, she’ll have the same retirement income, as if she saved an additional 10% of her paycheck for 23 years and stopped work at 66.

If you can keep working, even for a short period of time, keep going! It will make a big difference when you do retire.

Reference: Bloomberg Business News (Sep. 27, 2018) “Seventy Is the New Sixty-Five”

Suggested Key Terms: Retirement, Employment, Older Workers, Social Security, Investment Portfolio

How to Cope When the Diagnosis Is Dementia

“A key to prolonging independence, participants told her, is to recognize the triggers that aggravate her symptoms and to adjust her routine to head them off.”

A diagnosis of early onset Alzheimer’s is life changing. The story of a busy workaholic sales executive, as detailed in the article “Leading an Active Life with a Diagnosis of Dementia” from The New York Times, has no happy ending. However, it does point to a way forward.

The number of people with Alzheimer’s disease who are 65 and older is expected to soar to 7.1 million in 2025 and 13.8 million in 2050. That’s an increase from today, when 5.5 million suffer from the disease, according to the Alzheimer’s Association. Add to that 200,000 people younger than 65 who are estimated to have the disease, and that is not counting those with dementia from vascular disease, Lewy body, and other kinds of dementia.

There is the possibility, however, that people in the early stages of the disease can still pursue fulfilling lives. They must, however, make plans immediately for future care.

The first step is to create a team of professionals, including an estate planning attorney, the physician, a geriatric care manager and a financial planner. Trusted family members should be in on all planning to coordinate and oversee their work.

The challenging legal question is if a person with a diagnosis of dementia sign legal documents? These necessary documents include financial and health care powers of attorney, as well as a will. The person’s attorney may need to seek a clinical evaluation to determine whether the client still has the decision-making skills to permit them to sign documents.

It is necessary to act quickly, because most types of dementia progress over time. Having the person evaluated, won’t preclude anyone from challenging the documents but it is a strong step in their defense.

An advance health care directive must also be prepared. This typically provides guidance on end-of-life treatment. A person with dementia is capable of living a very long time with their condition. It would be wise to have them involved with the preparation of this document, as well as the decision-making process, while they are still cogent. Instructions can include details, like what they think they would want in terms of care setting or caregivers.

Planning to pay for long-term care is an important part of planning for a long life with dementia. For some people in the early stages, it makes sense to protect assets from long-term care costs. Medicaid, financed by state and federal governments, pays only for people with limited assets while state laws vary. This is an area where you need the help of an elder law attorney. Planning must also be done soon after diagnosis, since there is a five-year look-back and other penalties, if planning is not done on a timely basis.

Many Alzheimer’s Association chapters offer support groups and socialization for patients and caregivers. This is not a journey you want to take on your own and you don’t have to.

Reference: The New York Times (October 5, 2018) “Leading an Active Life with a Diagnosis of Dementia”

Suggested Key Words: Alzheimer’s Disease, Long-Term Care, Power of Attorney, Advance Care Directive, Will, Medicaid

Keep These Facts in Mind as You Plan for Retirement

“As we baby boomers enter retirement, a number of financial concerns emerge. Most of us are not prepared for what’s coming and the decisions that need to be made.”

When retirement is an event that takes place in the far-away future, it’s a concept, not a reality.  However, as we reach our late fifties and early sixties, retirement becomes more than just an idea. As the article “Some important considerations for retirement” from Florida Today explains, we need to be prepared for some big decisions and some big changes.

The biggest issue in many families, is deciding how much money to spend from their retirement savings accounts and investments. There are many guidelines and formulas. However, no one formula is correct for every situation. It requires a closer look to consider where to draw funds from: retirement accounts or investment accounts, pre-tax or after tax?

There also need to be adjustments made for market volatility and risk tolerance.

It is hard to adjust from living on a steady stream of income from work, to depending on withdrawals from what used to be accounts that were only for savings. A well-designed plan and a specific set of actions on how to live on retirement savings without taking too much money, especially at the start of retirement, is critical.

Retirees need to understand that they may, if they are lucky, be retired for more than one or two or more decades. A balance of taking not too much, nor too little, is what is needed to avoid running out of money, or frankly, not enjoying these last decades of their lives.

Savings need to last longer and must also retain their purchasing power, so that inflation, taxes and healthcare costs do not decimate accounts. We have lived through a historically low interest rate environment for many years. However, that is starting to change. We must be prepared.

Adding to the stress for retirees, is not having an estate plan in place. Speak with an estate planning attorney to ensure that you have a will, medical directives, power of attorney forms and, if appropriate, any trusts.

What often occurs is that one spouse knows everything about all the couple’s finances. When one spouse passes, the other is often left to figure it all out on their own. A better plan is to ensure that both spouses have a complete picture of their financial and legal situation. Both spouses should sit down with the estate planning attorney to ensure that they are both up to speed on what will happen when the inevitable occurs.

Single individuals need to prepare for retirement, with the additional burden of having to rely solely on themselves for funds. Planning for incapacity and general estate planning is more important, as non-family members must be found who can be trusted to make decisions on their behalf, if they are unable to do so and for distribution of their assets after death.

Preparing for retirement encompasses many different issues. However, for all of those issues, planning in advance with a trusted professional, can ease the process and ensure that retirement is an enjoyable and fulfilling time of life.

Resource: Florida Today (Oct. 22, 2018) “Some important considerations for retirement”

Suggested Key Terms: Retirement, Investments, Health Care, Taxes, Estate Planning, Power of Attorney, Incapacity

Should I Help My Aging Parents Manage Their Investments?

“Sooner or later everyone loses a step, and the results can be disastrous for older investors who choose overly risky holdings, forget to monitor their portfolio or fall prey to con artists.”

As Americans live longer and their portfolios grow for extended periods of time, their adult children should be watching carefully—but how closely? That’s the question posed by the article “How to Help Aging Parents Manage Portfolios,” from U.S. News & World Report. There is no one answer, and it is a delicate situation. It is also more so for some families than others.

It’s not easy to talk with parents about their finances and their vulnerability to scam artists. Today’s thieves are also savvy. They use Facebook and other forms of social media to learn about family members travelling outside of the country, then call the elderly parents and pose as the grandchild needing money immediately for an emergency.

Older adults, who are lower in numerical skills, tend to rely on their emotional response in making financial decisions. Loneliness and depression, common in aging seniors, also increase the risk of becoming a victim of a scammer. That’s especially so, in the case of someone who has recently become a widow or widower.

It’s often hard for the senior to discuss finances with their children, unless they have done so over the course of their children’s lives and are comfortable doing so.

The biggest marker for many elderly people, is the loss of their ability to drive. That’s followed by the inability to handle one’s own finances.

However, this problem is only growing, as investors live longer and portfolios continue to grow over the course of their lifetimes. It only takes a few mistakes for an impact to hit the portfolios and often there’s no recourse.

The first step for adult children is to be aware of any signs of mental decline. Just be careful not to jump every time someone can’t find the right word or remember someone’s name. Keep an eye on their behavior: a formerly neat person who is now leaving bank statements lying around open on their desk, past-due notices arriving or an extreme amount of mail from questionable charities (versus large nationally-known organizations). This mean it is likely they are having a problem handling day-to-day finances.

Don’t confront the issue in a challenging manner. Have a pleasant conversation, possibly starting with a talk about your own finances and how you speak with your own children, or plan to, to get them moving into the topic. Once they are comfortable talking about money, start discussing other important issues, like whether they have a will, medical directive or power of attorney.

These are not always easy conversations, but they are necessary. Ask if you can accompany them to a meeting with an estate planning attorney and be ready to help but not dominate the conversation. Treat them with dignity to make this potentially troubling process less burdensome.

Reference: U.S. News & World Report (Oct. 22, 2018) “How to Help Aging Parents Manage Portfolios”

Suggested Key Terms: Elder Abuse, Scams, Estate Planning, Investments, Power of Attorney, Portfolios

Boomers Come Up Against One Thing They Can’t Push Back On: Aging

“The vast majority of older working Americans don't have sufficient savings to retire full-time at age 65 with their pre-retirement standard of living. That's one of the sobering conclusions from the recent Sightlines report issued by the Stanford Center on Longevity (SCL).”

Boomers have always been proud of how they redefined many aspects of American culture. However, there’s one thing they can’t change: the inevitability of aging and death. A recent study from the Stanford Center on Longevity, reported by CBS’s MoneyWatch in “Tough retirement realities for baby boomers,” says that workers approaching retirement will either need to work past age 65, reduce their standard of living or some combination of the two.

This is going to take some soul-searching and adjusting for boomers, their families and employers.

According to the SCL report, nearly 30% of boomers have nothing saved for retirement. For those who do have savings, the median balance was $290,000 for those born between 1948 and 1953 and $209,246 for those born between 1954 and 1959.

Here’s a reality check for you: If you have $290,000 in retirement savings, you can expect to generate about $11,900 in annual income, based on a 4% annual withdrawal. Next, add in Social Security benefits. But that’s no panacea.

The average Social Security monthly benefit for new retirees in 2018 is $1,460, or $17,520 annually, according to Social Security.  Therefore, the total retirement income grows with Social Security benefits added in to $29,420 annually.

This is far less than the commonly recommended retirement income goal of 70 to 80% of your working income.

Are boomers making up for lost time, by accelerating their retirement savings rates? Not according to this study, that shows they aren’t even putting away the amounts they should have been putting away all along.

The SCL study summarized two analyses that suggest the amounts that boomers should be saving and compares those amounts to what boomers are actually saving.

The Boston College Center for Retirement Research says that workers who start saving at age 25 and want to retire at age 65 should save 10% of their income during those years.  However, only 36% of all workers who have a retirement plan through their work actually contribute 10% or more.

Workers who start saving at age 35 and retire at age 65, should be saving 15% of their pay. However, in actuality less than 20% are contributing this much through their workplace retirement plan.

Boomers who come up against the hard realities of retirement, are likely to do what they have done all along—redefine this next stage of life.

Reference: CBS MoneyWatch (Oct. 22, 2018) “Tough retirement realities for baby boomers”

Suggested Key Terms: Baby Boomers, Retirement Savings, Social Security