Klitzman Law Group, PLLC

Seniors Cannot Be Careful Enough About Internet Scammers

The biggest threat to retirement accounts today isn’t a market downturn. It’s thieves who have become highly sophisticated in technology and human nature.

A recent article from The New York Times, “How One Man Lost $740,000 to Scammers Targeting This Retirement Savings,” tells how a 76-year-old retired attorney was duped into thinking he was helping an active government investigation when he was actually being scammed out of almost all of his retirement savings accounts. This man was one of many who were drawn into complex plots so intricate they could be used for crime novels.

Scammers are especially adept at using human vulnerabilities against their victims. Romance scams are more common. However, so are impersonators who purport to be law enforcement officials or technical support team members. They use basic psychological tactics to get victims to act, isolate them from friends or family who might be suspicious and present an opportunity to do good for others by helping in the so-called “investigation” or preying on our basic desire to connect and be liked by others.

In 2023, cybercrime theft was more than $12.5 billion, an increase of 22% from 2022 and more than three times the levels in 2019. These are just the crimes known to the FBI—countless others go unreported.

Seniors over 60 are targeted because they are seen as having savings worth pursuing. In 2023, seniors lost more than $3.4 billion to cybercrime.

For the retired attorney, it started when he had trouble logging into a 401(k) account. When he got in a few days later, the screen changed abruptly, and he was instructed to call the fraud department. There was a phone number on the screen. He was connected with his first scammer. Lesson one: If you’re having trouble logging into an account, close the window and find a phone number in a paper document or statement.

The man said he was a fraud investigator, and his money was vulnerable. The scammer built credibility by knowing the victim’s name and where all of his accounts were. This scammer connected him to another man, who claimed to be from the bank. A third man alleged to be from the IRS was on the phone. He provided his badge number to establish further credibility. They told their victim he had an opportunity to be part of their investigation. He was told not to disclose the investigation to anyone, including his three adult children.

A lengthy series of machinations began, with the victim giving the so-called investigators access to his accounts and transferring assets as the thieves kept up friendly banter about how the investigation was going. They told him one of their targets had been caught by Interpol and another was being tracked in Singapore.

The thieves guided him through many transactions, including moving money from an IRA to another bank because the bank had declined to release a large amount of funds, being wary of fraud. The thieves responded by saying the advisor was on their watch list, making their victim suspect the one person who was trying to look out for him.

The man only learned he was a scam victim when a real detective found his name and address on a paper receipt for gold in a car. He was one of at least seven people pulled into a scheme based in India. Making matters worse, his withdrawals created a tax bill: $285,000 in federal and state income taxes, which he cannot pay.

Awareness and a healthy skepticism should be part of every senior’s survival skill set. If someone promises involvement in a scheme or requests money, contact a trusted adult child, your estate planning attorney, or even the local police department to be sure you are not being scammed.

Reference: The New York Times (July 29, 2024) “How One Man Lost $740,000 to Scammers Targeting This Retirement Savings”

How to Prepare for Cognitive Changes in Your Life

Planning for the cognitive decline that often accompanies aging can prevent expensive mistakes, says a recent article from U.S. News & World Report, “How to Minimize 4 Financial Management Disasters That Come With Aging.” Planning for cognitive decline can make our later years less stressful.

Age and Vulnerability to Financial Elder Abuse. Simple tasks like paying bills can become problematic as our cognitive abilities diminish. This also leaves people more susceptible to fraud and scammers—today’s thieves’ prey on the elderly through telephone, online, mail and in-person schemes. Add a layer of protection by having a trusted person or family member oversee accounts. A professional fiduciary or a bill-pay service could be used if no family member is available or trustworthy enough.

Freezing a senior’s credit with major credit bureaus can make it harder for thieves to steal their identity, take out loans, or open credit cards under their names.

Financial documents should be organized, and their location should be shared with loved ones. Your estate planning attorney, financial advisor and CPA should have the contact info of a trusted person who can step in to manage your affairs, if necessary. Your estate planning attorney can create a Financial Power of Attorney, so they can act on your behalf.

You can appoint a representative payee with the Social Security Administration, so another person can help you with Social Security matters.

The Death or Disability of the Family’s Financial Person. One person in the household very often runs the business side of life, paying bills, balancing checkbooks and keeping an eye on investments. If that person dies or becomes disabled, the spouse needs to be able to take over finances. To do this, they’ll need to know more than the usernames and passwords on accounts—although they’ll need to know this information as well. Regular check-ins on financial matters with a spouse and a trusted adult is a good practice.

Planning for Long-Term Care Expenses. Failing to prepare for the cost of long-term care or to protect a couple’s assets with Medicaid planning can be financially catastrophic. Medicaid can help with the cost of nursing home care. However, if the family has assets, they must be used up before the person is eligible for care. Medicaid also has a five-year lookback period, meaning any transfers or sales of assets taking place five years from the date of application will delay eligibility. An estate planning attorney can help with the use of irrevocable trusts, often referred to as Medicaid Asset Protection Trusts. There are also trusts designed to protect assets for the healthy spouse. A consultation with an estate planning attorney long before long-term care is needed is critical to avoiding this mistake.

Outliving Your Money. Experts believe nearly two-thirds of Americans nearing retirement age are unprepared for two, three, or even four decades of retirement. The past year’s skyrocketing costs of living have prevented many from adding to their savings during the end of their working lives, and many don’t even have emergency savings. Having a financial plan and an estate plan is important at every age and stage of life.

Cognitive changes don’t happen to everyone as they age. However, it is still wise to have your estate planning done long before any changes occur. Having a will and any necessary trusts created and executed while you are at full capacity allows you to be the one making these decisions.

Reference: U.S. News & World Report (June 26, 2024) “How to Minimize 4 Financial Management Disasters That Come With Aging”

What Do You Do If Elderly Family Member Is Being Financially Abused?

Financial elder abuse is when a family member, caregiver, or another individual illegally or improperly uses an elderly person’s assets for their own personal gain without the knowledge or understanding of the elderly person. A recent article from The Sun Times News, “Elder Financial Abuse Can Be A Family Affair,” notes the coming “Great Wealth Transfer” of Baby Boomer assets could lead to a dramatic increase in elder financial abuse.

Even minor memory loss can be exploited by scammers and, sadly, family members. With nearly seven million Americans having moderate cognitive issues, the possibility of financial abuse is growing. Boomers live longer than any previous generation, translating into huge healthcare costs in post-retirement years. At the same time, their children and grandchildren face challenges, including student debt and high homebuying costs. The combination of these issues isn’t pretty.

A contributing factor is the increased misinformation about Medicaid, wills, trusts, guardianship and power of attorney. When seniors make their wishes known and formalize them through an estate plan and trusts to protect their assets, the chances of them becoming victims of exploitation can be minimized.

In many cases, isolation leads to vulnerability. One woman allowed her son’s ex-wife to move into her Colorado home to live with her elderly mother. The ex-wife fell victim to scammers herself and convinced the elderly mother to send two checks totaling $70,000 to two scammers, one claiming to be running a children’s mission in Nigeria and another rescuing animals in Malaysia. The elderly woman’s bank didn’t question the large checks, which it should have. The ex-wife also forged checks worth more than $10,000 on the elderly woman’s account. The promised caregiving never happened, and while the woman was arrested and prosecuted, the family will never recover the money as the ex-wife is unemployable—she was a bookkeeper.

The National Center on Elder Abuse suggests only one in 24 cases of elder abuse is reported to authorities. If abuse of any kind is suspected, it should be reported immediately to the police in the jurisdiction where the senior lives. Financial statements, bank statements, credit card bills, canceled checks and evidence must be provided. Even if you don’t have evidence, suspected abuse should be reported.

Families can be torn apart when heirs battle over inheritances. Two means of prevention are creating an estate plan by an experienced estate planning attorney, with trusted family members or professionals to serve as Power of Attorney and executor. The second is to maintain ongoing contact with the senior, if possible, in person and, if not, via phone calls, video calls and visits. The more involved you are with an aging person’s life, the better your chances of uncovering or preventing financial elder abuse.

Reference: The Sun Times News (May 8, 2024) “Elder Financial Abuse Can Be A Family Affair”

How Do I Create End-of-Life Plan?

Any family facing the end-of-life of a loved one deserves to know what their loved ones want, as observed in an article from The New York Times, “How to Make End-of-Life Planning Less Stressful.” Hosting a family gathering with pizza and chocolate cake made the conversation easier for one family.

The reporter learned things about her family she never knew. Her parents didn’t want a memorial service because, as they told her, they don’t like big gatherings, alive or dead. A sister wants her memorial service held at Starbucks. The discussion included the possibility of having cremated remains pressed into a vinyl record of the person’s choice (her father’s comment). Taking a lighter approach worked for this family.

Here are some suggestions to start this important, albeit difficult, conversation:

First, ask the family members involved if they’d be open to a family meeting and set a date. It could be done via Zoom, although in-person is better if they are far-flung.

You could bring up a news story about dementia and say it got you thinking about how important it is to talk about these issues now. If you are the older family member, tell your loved ones you are putting your affairs in order and want to spare them the added stress of figuring out your healthcare and funeral wishes.

Create a document for the family to review and a checklist of topics and prompts to review. Two key areas to discuss are deciding who will serve as your health care proxy if you cannot make health care decisions and what directives you want in a living will.

Once these are decided, your estate planning attorney can make it enforceable by preparing a Durable Power of Attorney for Health Care. Copies should be given to loved ones and your doctor.

Another topic to cover, often overlooked, is what you or your aging parents want to do with the remaining years. You might ask, “What is undone in your life?” You may learn your parents have always wanted to visit an ancestral village in Italy or travel to see the Northern Lights. How can you help them make this happen? If your aging parent is a widow or widower, could an adult child travel with them?

These are significant questions and can’t always be resolved in one meeting. Having “check-in” conversations throughout the year will foster further communication between family members. This may also expand to issues like ensuring that their home is accessible for aging, from a ramp for the front steps to properly installed grab bars in the shower.

The conversation should also address the creation of a last will and testament. If your aging parents don’t have a will and you do, share your estate planning attorney’s contact information. If none of you has an estate plan in place, these conversations could help all the family move this critical task to the forefront.

Reference: The New York Times (March 8, 2024) “How to Make End-of-Life Planning Less Stressful”

What You Need to Know about Social Security

For millions of Americans, a monthly Social Security deposit into their bank accounts is a crucial source of retirement income. For those who have just started receiving benefits, there are a few basics to know, according to a recent article from NASDAQ: “New to Social Security? 3 Things You Need to Know.”

Social Security knows inflation is a problem for seniors living on fixed incomes. If you’re receiving $1,800 a month right now, in five years, the same amount of money won’t have the same purchase power as it does today. Every year, Social Security examines inflation and adjusts benefits, known as the Cost Of Living Adjustment, or COLA.

COLA’s goal is to ensure that your buying power stays the same over time. It’s not a pre-set amount but is based on inflation data. Unlike an annuity, which increases at a certain rate, Social Security COLA rates are reviewed and increased depending on inflation data. There may be one year when benefits increase a lot, but there will also be years when increases are practically nil if inflation is low.

You may continue to work and receive Social Security benefits, but if you haven’t reached Full Retirement Age, your benefits will have an earnings test limit. Full Retirement Age is when you can collect your monthly benefit in full based on your past earnings history. After this date, based on your birthday date, you can earn as much as possible without any benefits being withheld.

If you’ve started taking benefits before that time, an earnings-test limit will deduct a certain amount from your benefits. The limit, like the COLA, changes every year. In 2024, it’s $22,320 or $59,520 for wage earners who will reach their FRA in 2024 but haven’t gotten there yet.

The funds are not lost forever if you earn more than the limit. When you reach FRA, the money will be returned to your monthly benefit. But you must consider the deduction if you’re creating a household budget.

Social Security does have serious challenges that may impact your benefits. The dramatic headlines about Social Security trust funds running out of money come in waves, but there are some real problems ahead to be aware of. The trust funds are expected to run dry in 2034. While a lot can happen in ten years, seniors would be wise to try to bank some of their benefits in case they shrink. The more saved, the easier it may be to manage if and when these cuts occur.

While Congress may always act to fund the trusts, working a part-time job or as a consultant in your field may be an excellent way for many retirees to prepare for any future cuts and reduce their dependency on Social Security benefits.

Reference: NASDAQ (March 18, 2024) “New to Social Security? 3 Things You Need to Know”

How to Get a Conservatorship for a Parent

One woman felt she had no choice but to retain an attorney and petition the court for a conservatorship to manage her father’s finances. Her father had been targeted by a family acquaintance who tried to isolate him from his family. The acquaintance then married the widower and promptly took over his bank accounts. She was also appointed as the trustee of his revocable trust, as explained in an article from The Atlanta Journal-Constitution, “When it’s the right time to pursue conservatorship for your loved one.”

Conservatorship concerns the financial affairs of a person, managing assets and handling financial decisions for someone who cannot do so for themselves, whether from illness, injury, or other types of incapacity. A guardian is more concerned with the well-being and personal care of an incapacitated individual or minor, including day-to-day decision-making and healthcare decisions.

For the family situation mentioned above, the daughter researched ways to protect her father from losing everything. All resources pointed to conservatorship as the solution. The family was able to protect the father’s assets, including the nearly $200,000 eventually needed to provide round-the-clock medical care during his final year of life.

One daughter served as legal guardian, while a third-party county conservator managed financial matters. The pressure was relieved from the woman and her siblings by deferring the money management to a professional. Having a neutral third party handle finances allows the siblings to focus on their father’s care.

A conservatorship or guardianship is court-supervised and established when a person is deemed incompetent. By contrast, a Power of Attorney is a voluntary arrangement made while the person is still competent, offering a less intrusive alternative without court involvement.

In some situations, even when a Power of Attorney is in place, a court-appointed guardianship or conservatorship becomes necessary.

A conservatorship may become necessary because of significant mental decline from diseases like Alzheimer’s or a person’s inability to manage their personal or financial affairs. Anyone considering a conservatorship for a loved one must speak with an estate planning attorney. The attorney should have experience in probate courts, estate law, conservatorship and guardianship law and an empathic understanding of family dynamics.

People are advised to create estate plans as soon as possible, including executing an advance directive for health care and a durable power of attorney. If they lose their mental capacity without having executed a will, they leave themselves vulnerable to elder financial abuse.

Reference: The Atlanta Journal-Constitution (March 1, 2024) “When it’s the right time to pursue conservatorship for your loved one”

How to Protect Your Spouse when Diagnosis Is Dementia

Few illnesses are as terrifying as dementia, for which there is no cure. If estate planning is in place, it may need to be adjusted to address new, more imminent issues. Reviewing the family situation from a legal and financial aspect is critical, and there is no time for delay, explains a recent article from Morningstar, “’I don’t want my wife to lose everything’: I’ve been diagnosed with dementia –I suddenly could not spell or write legibly.”

There are a number of steps to be taken to smooth the path ahead. First is to update your will and create a financial power of attorney. Don’t try to do this without the help of an experienced estate planning attorney.

This may also be the time to reassess your investment portfolio based on your new financial plan and risk tolerance.

An Advanced Healthcare Directive will inform doctors what actions you want them to take when you cannot make those decisions for yourself. You may want to list your wife as your healthcare proxy to carry out these decisions, but be mindful of the pressures put on a marriage when serious healthcare issues occur. Your spouse will need emotional support as well, and you’ll want to have a successor to your spouse for both the healthcare and POA documents.

Share your situation with trusted family and friends to create a team–a community of people who can provide support, part of which will be updating beneficiaries. Now would also be the time to record instructions for access to devices, documents, and even daily habits.

Long-term care insurance will help with expenses and should serve as an example for anyone reading this article. Policies should be purchased early in life when they are relatively affordable to help alleviate the financial burden of nursing home costs.

An estate planning attorney and financial advisor will help you take an accounting for assets, expenses, and projected long-term care costs. You’ll want a team approach to provide as much guidance as possible.

When to put your long-term care policies into payout status is a difficult decision. You’ll need to time this with a Medicaid plan, which your elder law estate planning attorney will be able to help with.

Now may also be the time to create a trust and divest assets to make it through the five-year Medicaid look-back, using your long-term care policy in the next five years.

There are exceptions to the five-year look-back rule for Medicaid eligibility. They include paying off debts, buying medical devices, or making home improvements to improve accessibility. However, eligibility depends upon income and other assets.

Some states, including Florida and New York, have rules exempting homes from assets calculated by Medicaid under certain circumstances. California eliminated an asset limit this year, making a person’s home automatically safe from Medicaid while they are living, but this does not mean it’s exempt from the Medicaid Estate Recovery Program.

Working with a team of professionals, including an estate planning attorney, and having the support of family and trusted friends will be important as time goes by and the disease progresses.

Reference: Morningstar (Feb. 25, 2024) “’I don’t want my wife to lose everything’: I’ve been diagnosed with dementia –I suddenly could not spell or write legibly”

What is the Most Important Document in an Estate Plan?

The priority of every estate plan, regardless of your age, is the medical care documentation. Even while making decisions on other aspects of your estate plan, says this article from Forbes, “Be Sure You Have The Most Important Document In Every Estate Plan,” you should get these documents done to protect your care and comfort for the rest of your life.

Some of the document’s names may vary from state to state. However, your estate planning attorney will know which ones you need.

HIPAA Authorization. The Health Insurance Portability and Accountability Act of 1996 protects patient privacy but also makes it illegal for people you don’t authorize in writing to gain information about your medical status. You’ll need a document authorizing medical providers to discuss your situation with key people in your life. Once the document is executed, distribute copies to medical care providers and the people named in the document.

Living Wills and Advance Directives. Living wills were once simple statements, stating, “If I have a terminal condition and there’s no hope of recovery, don’t prolong my life by artificial means.”  These statements are now considered obsolete. Medical science has advanced to a point where it cannot be said with certainty whether someone may improve. There are also disagreements about whether some types of care, like the use of a ventilator, should be considered artificial life support or essential to helping a patient recover from a serious illness.

To address this, some estate planning attorneys create detailed custom living wills, using questionnaires with different scenarios so their clients can decide in any of the situations. Of course, you can’t anticipate every situation, and there can be differences of opinion about diagnosis and prognosis. There are instances where medical providers aren’t given the documents until after treatment has been administered. However, it’s better to express your wishes proactively.

Healthcare Power of Attorney. The limits of living wills and advance directives have led some estate planning attorneys to replace or supplement them with a healthcare power of attorney or healthcare proxy. The HPOA gives one or more people—known as your agents—the authority to make medical decisions if you cannot. The agents talk with your healthcare providers to understand your situation and options. They then make decisions in tandem with the wishes stated in your living will.

Agents need to be available, so you’ll want to name people who are nearby. Appointing more than one agent can provide flexibility in an emergency.

Do Not Resuscitate/Hospitalize. It’s common for older, frail patients to decide they don’t want to be resuscitated or hospitalized. For example, CPR is often declined because while it may bring a person back to life momentarily, their eventual passing may become violent rather than peaceful. The thinking behind DNR orders is this: at some point, hospitalization or treatment for every new ailment only briefly extends life without improving its quality and could reduce the person’s quality of life. Make sure a DNR/DNH is easily accessible to first responders, give medical providers a copy and consider having a bracelet or necklace with these letters.

Once all these documents are executed and circulated, it will be time to focus on distributing property and protecting assets.

Reference: Forbes (Jan. 22, 2024) “Be Sure You Have The Most Important Document In Every Estate Plan”

New Required Minimum Distribution Rules for 2024

In 2023, the SECURE 2.0 Act changed the age for starting RMDs (Required Minimum Distributions) to 73, and in 2033, the age will change to 75. Depending upon your income from RMDs and other sources, premium costs for Medicare could increase once withdrawals begin, and taxes may also be higher, reports the article “Don’t Overlook These New RMD Rules for 2024” from U.S. News & World Report.

RMDs are required distributions taken from traditional IRAs and 401(k)s after a certain age. There are expensive consequences for missing withdrawals, and some guidelines relating to charitable giving and Roth 401(k) RMDs.

Before the SECURE 2.0 Act, the age to start RMDs was 72. In 2024, if you were born between 1951 and 1959, you must start your RMDs after age 73. Were you born in 1960 or later? You can delay RMDs until you reach age 75.

Deadlines are important to know. You may get a little more time to take your first RMD. However, subsequent RMDs must be taken each calendar year. If you’re celebrating your 73^rd birthday in 2024, you have two choices: you can take your first RMD by December 31, 2024, or you can choose to wait until April 1, 2025. However, if you decide to wait until April, you’ll have to take a second RMD by December 31, 2025.

RMDs are calculated on the prior year’s account balance on December 31, so delaying an RMD isn’t always the best strategy. Having to take two RMDs in the same year will mean, in most cases, the RMD will be slightly higher for year two.

What you pay for Medicare Part B and D premiums is related to income. If you delay taking withdrawals until age 73, your income could be lower, and your premiums could be less. Once you start taking RMDs, your income may go up, and Part B and D premiums may be more expensive.

You'll face penalties if you fail to take an RMD at the right time. Before the SECURE Act 2.0, the tax penalty was 50% on the required amount not withdrawn. If you failed to take an RMD of $2,000, you’d need to pay $1,000 in penalties. The penalty is now 25%. This is better, but still costly. If you miss a $2,000 RMD, the penalty will be $500. However, if the error is corrected within two years, the penalty drops to 10%, so it pays to address the issue. In some cases, if you can prove the RMD was due to a mistake and demonstrate that reasonable steps were taken to address the issue, you might get lucky, and the IRS could waive the penalty altogether.

Talk with your estate planning attorney about tax planning for RMDs. There are several strategies, including making charitable donations directly from IRAs and 401(k)s, which may be appropriate for your situation.

Reference: U.S. News & World Report (Jan. 26, 2024) “Don’t Overlook These New RMD Rules for 2024”

Estate Planning When a Loved One Needs Hospice Care

Many families discover their loved ones haven’t done any estate planning, only when moving a parent into hospice. Whether or not any last-minute estate planning can be done depends upon the loved one’s condition, explains the article “The Challenge of Last Minute Estate Planning” from HomeCare.

If they cannot speak for themselves and do not have a Power of Attorney prepared, last-minute planning is no longer an option. If they can speak for themselves, there may be time to complete a few tasks to make things easier for surviving family members. The family should immediately seek guidance from an experienced estate planning attorney. Here are the steps to be implemented.

Create or update the will. If there is no will, have one created as soon as possible. If one exists, it needs to be reviewed and updated. Use this opportunity to communicate their wishes with family members and others to prevent misunderstandings.

Designate beneficiaries. Ensure that all accounts (bank, retirement, life insurance policies, trusts) have updated designated beneficiaries.

Consider a Revocable Living Trust. If time permits, a revocable trust could be considered for certain assets to take them out of the probate estate and provide flexibility in managing the estate.

Power of Attorney and Healthcare Proxy. They’ll need to designate someone they trust to make financial and healthcare decisions on their behalf.

Guardianship for minor children. If the person entering hospice has minor children, they can designate a guardian in their will to ensure the children’s care and well-being. Someone who is terminally ill at a young age usually has thought about who they want to care for their children. However, this needs to be put into the will.

Emergency document kit. It’s a good idea to prepare a document kit including important information, including a list of assets, passwords, insurance policies and contact information for the estate planning attorney, CPA and financial advisor. Keep these documents in a secure and accessible location.

Digital assets. Create a list of assets, including user logins, passwords and the nature of the digital asset. Include instructions for managing or transferring digital assets, including social media, email and online accounts. There are ways to create legacy contacts for social media, so the accounts can be memorialized or shut down in the future.

Discuss and finalize important decisions. Wishes about end-of-life care are more important than ever. Do they want to be kept alive by artificial means, or is pain management their primary concern? If possible, have these discussions in a supportive and loving manner. A hospice counselor or death doula may be helpful.

Ideally, estate planning should be done long before hospice becomes necessary to ensure that the estate is handled correctly, and a person’s wishes are followed. When last-minute estate planning is needed, it’s critical to collaborate with an experienced estate planning attorney.

Reference: HomeCare (Jan. 16, 2024) “The Challenge of Last Minute Estate Planning”