To-do List for 2019 Should Include These Documents

Don’t wait until you are under pressure, to create these safeguards.

If you don’t have documents that protect you, your family and your assets, you should consider doing yourself a favor and putting them on your list to accomplish in 2019, according to Fox Business in “3 financial documents everyone needs”

A Will. The essential function of a will is to ensure that your wishes are carried out, when you are no longer alive. It’s not just for rich people. Everyone should have a will. It can include everything from your financial assets to life insurance, family heirlooms, artwork and any real estate property.

A will can also be used to protect your business, provide for charities and ensure lifelong care for your pets.

If you have children, a will is especially important. Your will is used to name a guardian for your minor children. Otherwise, the state will decide who should rear your children.

Your will is also used to name your executor. That is the person who has the legal responsibility for making sure your financial obligations are honored. Without an executor, the state will appoint a person to handle those tasks.

A Trust. This one isn’t mentioned by Fox Business, but if you live here in California and own your home (even if there is still a mortgage on it), you need a revocable living trust. This is because in California, our probate process, which is the court administration of the estate of someone who doesn’t have a trust, is very lengthy, time-consuming, and expensive.

An Advanced Medical Directive. What would happen if you became ill or injured and could not make medical decisions for yourself? An advanced medical directive and health care proxy are the documents you need to assign the people you want to make decisions on your behalf. The advanced medical directive, also called a living will, explains your wishes for care. The healthcare proxy appoints a person to make healthcare decisions for you. As long as you have legal capacity, these documents aren’t used, but once they are needed, you and your family will be glad they are in place.

A Durable Power of Attorney. This document is used to name someone who will make financial decisions, if you are not able to do so. Be careful to name a person you trust implicitly to make good decisions on your behalf. That may be a family member, an adult child or an attorney.

Once you’ve had these documents prepared as part of your estate plan, you’re not done. These documents need to be reviewed and updated every now and then. Life changes, laws change, and what was a great tax strategy at one point may not be effective, if there’s a change to the law. Your estate planning attorney will help create and update your estate plan.

Reference: Fox Business (Dec. 19, 2018) “3 financial documents everyone needs”

Seconds to Leave Your Home? What Do You Take?

A “go-bag” can protect your family, until you can head home again.

With the recent wildfires affecting Ventura County, you never know when an emergency will arise that causes the evacuation of your home. If that should happen, do you have a “go-bag” that will protect your family until life returns to normal. If not, then you should have, according to The Union in “The most important ‘go bag’ item for emergencies is only 2 inches long.”

A “go-bag” protects your family with credit cards, cash, flashlights, flares, batteries, warm clothes, prescriptions and other necessities, is just one part of being prepared. That’s your “financial go bag.” It won’t feed you or keep you warm, but it will save you countless hours and headaches, when life returns to normal.

Here’s what you need to know:

  1. Gather all your important documents. That means your driver’s license, passport, birth certificate, social security card and Medicare card. If you own your home, you should include deeds to property and titles to cars, as well as insurance policy summaries for home, auto, medical, long term care, life, or umbrella policies. Include statements for checking, savings, investments, debt accounts with account numbers and federal and state tax returns from the last three years. Add estate planning documents (if you’re a client of ours, simply grab the USB drive we provide with instead of the physical documents themselves – much easier!). If you have a pet, include their license information, chip ID and vaccine records. If there is an 800 number for a service that can track your pet, make sure to include that.
  2. Create a physical list of important phone numbers and addresses for family members, professionals including your estate planning attorney, CPA, financial advisor, dentist, doctors and emergency contacts. Print it out and put it in your go bag. If you don’t have any power, your list on the phone will not be accessible.
  3. Create a video inventory of your home, including the contents of dressers, drawers, cupboards, collections. Don’t forget the garage and outdoor landscaping.
  4. Scan all this information and store it on two thumb drives (also known as memory sticks). Protect the information by using an encryption method to secure it in case it gets lost.
  5. Put one of these thumb drives into your safe deposit box and another in your go bag. Even a fireproof safe won’t survive a massive wildfire, so don’t put it in a safe in or under your house. Put the go bag somewhere near an exit point, where it blends in and is secure.
  6. Tell your family and closest friends that you have a financial go bag and where it can be found.

Reference: The Union (Dec. 23, 2018) “The most important ‘go bag’ item for emergencies is only 2 inches long”

How Do You Fill Void When Caregiver Role Ends?

What happens to the caregiver, when your loved one is gone?

Providing care for another adult can be difficult, because the caregiver often puts their life on hold.  They may find themselves facing a new challenge later, according to the AARP Bulletin in “What Happens When Caregiving Ends?”

The article concerns a 65-year old woman, who devoted two years of full-time caretaking for her mother. When her mother died, she was left with the process of grieving and a big void in her life.

When their duties as caregivers end, it takes a while to adjust. Some say it takes from six months to a year to start feeling like themselves again. Here are some lessons learned from caregivers:

Stay busy and don’t let yourself become isolated. If you loved to travel before becoming a caregiver, return to that passion. You can travel with friends, or colleagues—best to go with friends. Others find comfort in passions like writing, which can be soothing after years of coping with constant emergencies.

Expect unexpected emotions. Caregiving is an emotional process as well as a mental and physical one. A range of emotions, from sadness and grief to anger and frustration, often emerge when your daily existence includes free time. There’s also a lot of guilt, which is very normal. Years, months or weeks of not sleeping, giving up your own interests and enjoyment in life, can lead to frustration. Then, when the person dies, you feel terribly guilty about the relief you may feel.

Don’t expect the strong and often conflicting feelings to go away overnight. It often takes years for people to work through all of the emotions surrounding the loss of a loved one. That is especially true, if they were the primary caregiver. We tend to think in terms of one-year anniversaries, but for many people the first year is wrapped up on settling estates, distributing possessions and dealing with the business end of someone’s life. In the second year, when those tasks are done, or less time-consuming, the emotions can start flooding in. You might expect yourself to be “over it,” but you can’t force yourself to recover. It takes a very long time.

Delay any big decisions. If you’ve been putting off big decisions until after caregiving ends, give yourself permission to continue to delay them. You’re still in a fragile state and need to move slowly. Selling a house, getting a divorce or remarrying is best done when you are healed. Patience is not easy, especially when you want to make a fresh start, or move away from a home with painful memories. However, going slowly will provide you with time to heal, and to gain perspective that will allow for better decisions.

Give yourself permission to move on. When the time is right, you’ll be ready to move on.

Reference: AARP Bulletin (November 2018) “What Happens When Caregiving Ends”

Can Bankruptcy have an Impact on Your IRA?

Protection varies, according to state law.

IRAs are protected from bankruptcy. However, there are some limitations you should guard against, according to The Balance in “What is IRA Bankruptcy Protection?”

President George W. Bush signed bankruptcy protection into law in 2005 with the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCA). This new law insulated retirement accounts from creditors, by providing that contributions to various retirement plans were excluded from the property of the estate. This was the first time that protection for individual retirement accounts existed.

Today, IRA bankruptcy protection includes all the retirement accounts: traditional IRAs, Roth IRAs, SEP IRAs, SIMPLE IRAs and rollover IRAs. Protection is limited by the amount, which increases on a regular basis.

Here’s a look at the IRA bankruptcy protection from BAPCA:

Traditional IRAs and Roth IRAs: The most recent adjustment was in 2016, when the protection limit was increased to $1,283,025.

SEP IRAs and SIMPLE IRAs: These IRAs receive the same protection limits as traditional and Roth IRAs. They are used by self-employed people and small businesses.

Rollover IRAs: These are traditional and Roth IRAs that were funded by rollover transfers from an employer-sponsored retirement plan, like a traditional 401(k) or a Roth 401(k).

Inherited IRAs, also called Beneficiary IRAs: The Supreme Court determined in Clark v. Rameker that the above protections do NOT apply to inherited IRA’s. If protection of the IRA’s you leave your loved ones is a concern, an experienced estate planning attorney can help.

These protections are considered to be high enough to cover most American’s IRA accounts. There are some assets that are not protected. Some examples include general creditors, IRS levies and divorce.

General Creditors: There’s no federal protection for IRA owners, and the protection from general creditors varies by state law. In California, that protection is minimal.

IRA Assets and IRS Levy: If you owe past taxes to the IRS, they can levy your pay and your IRA. They’ll generally go after other assets first, but if necessary, your IRA is fair game.

IRA Assets and Divorce: What happens to your IRA in a divorce, depends upon a court order and other assets that are held. If IRA assets are divided, taxes can be avoided. According to the “incident to divorce” rules in the tax code, IRA assets can be transferred and split between spouses without taxation within one year of the formal divorce date. This is one where you want a skilled CPA and family law attorney on your side, so the tax liability is minimized.

What about 401(k)’s? Good news, under ERISA, the federal law governing 401(k)’s, these accounts are protected in both bankruptcy and from lawsuits without limitation, unlike IRA’s.

An estate planning attorney can advise you in creating an estate plan that fits your unique circumstances, as well as advise you on protecting your IRA assets.

Reference: The Balance (Dec. 12, 2018) “What is IRA Bankruptcy Protection?”

The Majority of Elderly End Up Needing Long-Term Care

Not having a long-term care plan, can put your family at financial risk.

A government report estimates a vast majority of those over 65 will end up needing long-term care. However, many people do not have plans to meet the expenditures, according to Westfair Online in “Keybank poll reveals clients aren’t planning for long term care.”

A U.S. Department of Health and Human Services report found that people age 65 and older have a very good chance—70%—of needing long-term care. Despite this, most people do not have plans in place.

This is true for people with assets exceeding $1 million and for people with more modest assets. In a study by Keybank, fewer than a quarter of high net-worth clients had plans in place for long-term care. This poses real financial risks, to the individuals and their families.

Consider the costs of long-term health care. One study from Genworth Financial reports that in 2017, the national median cost of a home health aide was roughly $49,000 a year, assisted living facilities could cost $45,000 (that’s not including medical services), and a private room in a nursing home came close to $100,000 annually. Here in California, costs are often higher.

Why don’t people plan ahead for long-term care? Perhaps they think they will never become ill, which is not the case. They may think their health insurance will cover all the cost, which is rarely the case.  They may believe that Medicare will cover everything, which is also not true.

Everyone’s hope is that they are able to be at home during a long illness, or during their last illness. However, that’s often not a choice we get. This is a topic that families should discuss well in advance of any illness. Talking with family about potential end-of-life care and decisions is important for setting expectations, delegating responsibilities and avoiding unpleasant surprises.

The other part of a long-term care discussion with family members needs to be about estate plans and decisions about the disposition of assets. Everyone should have an estate plan, and all information including deeds, trusts, bank and investment accounts and digital assets should be discussed with the family. You’ll also need a power of attorney and advance healthcare directive to carry out your wishes. An experienced estate planning attorney can help create an estate plan and facilitate discussions with family members.

Reference: Westfair Online (Sep. 7, 2018) “Keybank poll reveals clients aren’t planning for long term care”

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