What Should I Keep in Mind in Estate Planning as a Single Parent?

Every estate planning conversation eventually comes to center upon the children, regardless of whether they’re still young or adults.

Talk to a qualified estate planning attorney and let him or her know your overall perspective about your children, and what you see as their capabilities and limitations. This information can frequently determine whether you restrict their access to funds and how long those limitations should be in place, in the event you’re no longer around.

Kiplinger’s recent article, “Estate Planning for Single Parents” explains that when one parent dies, the children typically don’t have to leave their home, school and community. However, when a single parent passes, a child may be required to move from that location to live with a relative or ex-spouse.

After looking at your children’s situation with your estate planning attorney to understand your approach to those relationships, you should then discuss your support network to see if there’s anyone who could serve in a formal capacity, if necessary. A big factor in planning decisions is the parent’s relationship with their ex. Most people think that their child’s other parent is the best person to take over full custody, in the event of incapacity or death. For others, this isn’t the case. As a result, their estate plan must be designed with great care. These parents should have a supportive network ready to advocate for the child.

Your estate planning attorney may suggest a trust with a trustee. This fund can accept funds from your estate, a retirement plan, IRA and life insurance settlement. This trust should be set up, so that any court that may be involved will have sound instructions to determine your wishes and expectations for your kids. The trust tells the court who you want to carry out your wishes and who should continue to be an advocate and influence in your child’s life.

Your will should also designate the child’s intended guardian, as well as an alternate, in case the surviving parent can’t serve for some reason. The trust should detail how funds should be spent, as well as the amount of discretion the child may be given and when, and who should be involved in the child’s life.

Your trust should state who has authorized visitation rights, including the right to keep the child for extended visits or for vacation. It should also name the persons who are permitted to advise or consent on major decisions in the child’s life, on issues about education, healthcare and activities.

A trust can be drafted in many ways, but a single parent should discuss all of their questions with an estate planning attorney.

Reference: Kiplinger (May 20, 2019) “Estate Planning for Single Parents”

Suggested Key Terms: Estate Planning Lawyer, Wills, Guardianship, Trusts, Trustee, Asset Protection, Probate Court, Inheritance, Beneficiary Designations, IRA, Life Insurance

What’s a Death Tax?

The federal estate tax is sometimes called the death tax. It’s a one-time tax that is imposed at death. Forbes’ recent article, “Eight Things You Need To Know About The Death Tax Before You Die,” explains that it’s not unusual for people to mix up estate taxes with income taxes. The federal estate tax is a transfer tax imposed on individuals with estates over $11.4 million ($22.8 for couples). The tax is on anything over that amount and ranges between 18% and 40%. However, if you die with an estate less than $11.4 million in 2019, no estate tax is due.

Assets in your name only and everything else you had control over will be added into your gross estate. For example, all stocks, bonds, bank accounts and life insurance death benefits are included, as well as any real estate, business interests, jewelry, household furnishings and artwork.

Note: just because your family avoids probate with your estate, doesn’t mean they won’t have to deal with estate tax. For instance, life insurance is in your gross estate, if you owned or could control the policy. IRAs and 401(k)s are also included in your gross estate. Just because these assets aren’t included in the estate because they have a named beneficiary, it doesn’t mean they’ve avoided estate tax. It depends upon the level of control you had over the assets.

If you owned property jointly with a spouse, half of the home’s value is included in the gross estate. If you owned property jointly with someone else (not your spouse), then 100% of the value is included in the gross estate—unless you can prove that the other party contributed some or all of the value.

If you’re the beneficiary of a trust your parents created for you, those assets may be included in your gross estate, if you have certain rights over the trust assets.

If you’re married to a U.S. citizen, you get an unlimited marital deduction for all of the assets you leave to your spouse.  However, some states impose their own estate tax, which may require additional planning. For example, Massachusetts has a $1 million estate tax exemption. A tax may also be levied in a state where you own real estate.

Talk to an experienced estate planning attorney about your own estate tax liability, and what actions you can take to decrease any taxes that may be due.

Reference: Forbes (May 20, 2019) “Eight Things You Need To Know About The Death Tax Before You Die”

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Queen of Soul’s Handwritten Wills Raise More Estate Problems

The three handwritten wills found hidden in Aretha Franklin’s suburban Detroit home in May, may not be easy to figure out, says NBC News in the article “Aretha Franklin’s handwritten wills raise tangled legal questions.” There were a total of 16 pages, filled with scratch-outs, notes in the margins and the occasional digression.

In many states, these documents wouldn’t even qualify as wills, because they were not notarized and there is no evidence of any witnesses to Franklin’s signature. However, the iconic singer died in Michigan, and courts there are more likely than other states to take these documents seriously. Every state has its own laws about wills and estate documents. Michigan allows for “holographic” or handwritten wills, as long as they are dated and signed and as long as the “material portions are in the testator’s handwriting.”

One attorney who reviewed the scanned copies that were posted online, remarked that the wills seem to be dated and each page seems to be signed. One of the wills is dated March 2014, and two are dated 2010. However, legal experts have said it’s not quite clear whether the wills are in Franklin’s handwriting.

In that case, the probate court or Franklin’s family would have to seek out a handwriting expert or a forensic document examiner to study the handwriting. The examiner would need to see a more recent handwriting sample, to see if the characteristics of the handwriting match. However, there’s a lot of room for skepticism of any handwriting analysis. There’s no precise means of measuring and assessing handwriting, so there are doubters.

Another potential problem: the probate court would have to be certain that the documents were intended to be treated as a last will and testament. If there’s any doubt, verifying the pages will become more challenging. How can the court be sure that she meant the documents to be her will, or if she was just gathering her thoughts? The probate court would need to study the content of the documents and consider the circumstances in which they were written.

Franklin was 76 when she died in 2018 of pancreatic cancer. At the time, lawyers and family members said that she did not have a will. Her attorney, David Bennett, who had been her lawyer for four decades, filed the wills in a probate court in Michigan. He told a judge that he was not certain whether they were legal under state law.

The wills have been shared with Franklin’s four sons or their attorneys, but no decision had been reached regarding whether they were valid. In a statement, the estate said that two of the sons had objected to the wills.

Franklin is not the first celebrity to die without a will, and she certainly won’t be the last. James Brown’s estate has been tied up due to probate, family and copyright issues, since his death in 2006.

These high-profile cases of people who die without wills should encourage the rest of us to make sure that our estate plans are in place. We may not have amassed the wealth or possessions these celebrities have, but even our “normal” estates will create unnecessary headaches, expenses and strife for our families, if we do not prepare in advance for our own passing.

Speak with an experienced estate planning attorney and help your family avoid any additional stress after your passing, with a complete estate plan.

Reference: NBC News (May 23, 2019) “Aretha Franklin’s handwritten wills raise tangled legal questions”

Suggested Key Terms: Estate Battle, Holographic, Handwritten Wills, Probate, Estate Planning Attorney

Long Term Care Decisions Cause Challenges for Families

One year at an assisted living facility in New Hampshire has a median cost of $56,000, and the median annual cost of a semi-private room at a nursing home is $124,000, reports Genworth, a national insurance company known for its annual “cost of care” survey.

Families are often surprised to learn that health insurance and Medicare will pay little, if any, of the costs of long-term care, reports New Hampshire Business Review in the article “The dilemma of long-term care.” Some may try caring for a loved one at home, but this is stressful and often becomes unmanageable. Assisted-living facilities can be wonderful alternatives, if the family can afford them. Long-term care insurance is considered one of the important financial protections as we age, but relatively few people have it.

A growing problem with Medicaid-paid care, is that it can be hard to find a facility that accepts it. Not to mention that the loved one’s assets have to be down to $2,500 (note: this number varies by state), which requires advance planning or becoming impoverished through the cost of care.

Most people have no idea how this part of healthcare works, and then when something occurs, the family is faced with a crisis.

The Department of Health and Human Services projects that as many as 70% of Americans age 65 and older will need long-term care during their lives, for roughly one to three years. Yet little more than a third of all Americans age 40 and older have set aside any money to pay for that care.

There are ways to pay for long-term care, but they require planning in advance. This is something people should start to look into, once they reach 50. The top reason to do the planning: to take the burden of care off of the shoulders of loved ones. From a strictly financial viewpoint, we should all start paying premiums on long-term care as soon as we become adults. However, not everyone does that.

Families pay for long-term care with a mixture of assets:

  • Personal savings provide the most flexibility. This is not an option for many, as one half of American households with workers 55 and older had no retirement savings.
  • Veterans disability benefits can be used for long-term care services, but the non-disability benefits available to veterans are more limited. They may cover in-home services and adult day care, but not rent at an assisted living facility.
  • If a loved one owns a home, they can take out a reverse mortgage and use the lump sum or monthly payout for long-term healthcare needs. The money is repaid, when the home is sold or passed on to an heir.
  • Medicare will pay for some long-term care, but only under very limited conditions. It may cover skilled nursing care in a facility but not the care for daily living activities, including toileting, dressing and others. Coverage is all expenses for the first 20 days in a facility and then there is a daily co-pay of about $170 for the next 80 days, when all coverage stops.
  • Medicaid is the source of last resort, but what many families eventually turn to.

Planning in advance for long-term care is the best option, and while premiums for long-term healthcare may seem expensive, having insurance is better than having no insurance. For many families, watching the costs consume a lifetime of savings is enough of a spur to planning for long-term care. Speak with an elder law attorney about to prepare for long-term care needs, as part of your estate plan.

Reference: New Hampshire Business Review (May 23, 2019) “The dilemma of long-term care”

Suggested Key Terms: Long Term Care Insurance, Assisted-Living Facility, Nursing Home Care, Disability, Medicare, Estate Plan, Elder Law Attorney

Scammers Now Claim to be From Social Security Instead of the IRS

For a long time, the callers identified themselves as calling on behalf of the IRS, pretending to be a representative wanting to collect taxes, personal information or both from their prey. However, in the last year, federal authorities say they have seen the number of scammers claiming to be from Social Security take a massive leap and have now overtaken the fake IRS calls, as reported in the article “Latest Rash of Calls Come From ‘Social Security’” from The New York Times.

That doesn’t mean to say that the IRS scam isn’t still around. The IRS lists the “imposter calls” as one of its dirty dozen scams. Scam artists are flexible and quick to adapt to changing circumstances and trends.

More than 76,000 reports about fake Social Security calls were made in the twelve months ending in March, with reported losses of $19 million. That’s according to the Federal Trade Commission (FTC), which investigates consumer fraud.

By comparison, consumers reported $17 million in losses to the IRS scam during its peak time, the twelve months that ended in September 2019. This information comes from the FTC’s Consumer Sentinel Network database, a pool of millions of consumer complaints.

The typical loss to an individual consumer is about $1,500. However, those are only the people who have contacted the FTC to report their situation.

In most cases, the criminals are aggressive and try to scare their targets into action. The caller tells the person that their Social Security number has been suspended, because it has been involved in a crime or due to suspicious activity. The caller often asks the victim to confirm their Social Security number. They tell their victims that they must act fast and that their bank accounts will be frozen, if they don’t act quickly.

Some people, especially seniors, are scared into action. However, the calls are not real.

The Social Security Administration does not make phone calls to individuals out of the blue. Don’t reveal or confirm your Social Security number to anyone who calls.

Don’t trust the number that appears on your caller ID. Thieves use technology to make it appear that the calls are coming from a government agency, but they are not.

In April, the inspector general of Social Security warned consumers that fake calls had spoofed the agency’s own fraud hotline number. That number will never appear on a consumer’s phone, as it is never used to make outgoing calls.

The best thing to do is hang up.

If you are concerned that the call might be real, call the agency directly yourself, using a phone number that you have found and not the number given to you by the scammer.

Older adults are more vulnerable to these calls, because they have access to their lifetime savings and they often exhibit behavior that puts them at risk. During a study of scam awareness, more than three fourths of seniors participating in the study answered the phone when it rang, even if they didn’t recognize the number. They also said they listened to telemarketing calls and struggled with ending unsolicited calls. The study also noted that falling prey to a telephone scam may be an early warning sign of cognitive problems in the future.

Reference: The New York Times (May 3, 2019) “Latest Rash of Calls Come From ‘Social Security’”

Suggested Key Terms: Social Security, Scams, IRS, Seniors, Telephone Scammers, Spoofing

New Medicare Advantage Benefits Starting in 2020

Medicare Advantage plans offer benefits you cannot get with original Medicare. However, Advantage plans usually do not provide the level of coverage you were used to getting through an employer-sponsored health insurance plan. The benefits Medicare does not offer are the ones that aging adults tend to need more than younger people.

Americans have wondered for a long time, when Medicare plans would include coverage that aligns better with the health insurance, they were used to having in employer group policies. There is good news. You will soon have more options available, if you have Medicare Advantage. There will be new Medicare Advantage benefits starting in 2020.

What is Changing

Beginning in 2020, the private insurance companies that sell Medicare Advantage plans will be allowed to offer a range of benefits that fall outside of traditional healthcare coverage. The administrator of the Centers for Medicare and Medicaid Services (CMS) justified the additional options, because the new items can improve or maintain an aging person’s health or function. The expanded coverage you can get, will depend on the specific Medicare Advantage plan you buy. However, Congress has approved the expansion of plans to include transportation, home meal deliveries and some housekeeping services.

Differences Between Original Medicare and Medicare Advantage Plans

When Medicare started, there was only one plan. We now call that coverage “original Medicare.” As time went by, the government gave private insurance companies permission to offer coverage to people who are eligible for original Medicare. The policies are not identical, so you should educate yourself on all your available options to get the best coverage you can at the right price. Some of the differences between original Medicare and Medicare Advantage include:

  • Public versus private plans. The government administers original Medicare plans. Medicare Advantage policies, on the other hand, are private insurance.
  • Which doctors and hospitals you can use. With original Medicare, you can go to any doctor or hospital that accepts Medicare. Medicare Advantage is more like a PPO, in that you have to use the doctors and hospitals in the plan’s network.
  • Prescription drug coverage. Most Medicare Advantage plans include prescription drug benefits. People who choose original Medicare do not have drug coverage, unless they buy it as an add-on, called Medicare Part D.
  • Dental, vision, and hearing. Original Medicare does not offer benefits for dental, vision, or hearing care. Most Medicare Advantage plans include coverage for these services.
  • Deductibles and co-pays. People with original Medicare have to buy supplemental policies, if they want help with co-pays and deductibles. Medicare Advantage plans usually pay most or all of these costs.
  • Transportation, home meal deliveries and some housekeeping services. As of 2020, Medicare Advantage plans can offer these benefits, but original Medicare will not.

Why Original Medicare Does Not Offer More Options

Congress has to give permission for original Medicare to expand its coverage. So far, Congress has not authorized additional coverage options for original Medicare, but there might be some pilot programs in the future to increase those benefits. As society becomes aware that a holistic approach will improve one’s overall well-being better than merely popping pills, additional non-medical benefits might become available.

References:

AARP. “Medicare Advantage Benefits Expanding (accessed May 2, 2019) https://www.aarp.org/health/medicare-insurance/info-2019/medicare-advantage-expanded-benefits.html

Suggested Key Terms: new Medicare Advantage benefits, 2020 new Medicare Advantage options, more Medicare Advantage benefits

Is It a Robocall?

Robocalls are a daily annoyance at best and, at worst, a way for criminals to wipe out your hard-earned savings. Law enforcement officials work hard on catching these crooks but face daunting challenges. This is because telephone scammers are highly organized and operate out of many different countries. Fortunately, experts know some of the key phrases and tactics these con artists use. This information can help you answer the question: Is it a robocall?

Experts advise people not to answer any phone call, if you do not recognize the number of the caller. This advice used to be more useful before the scammers found ways to hijack Caller ID and mask their calls, as coming from people or organizations you know or trust.

The scams tend to follow certain patterns, depending on the type of fraud the crooks are trying to perpetrate. Here are some examples:

Social Security Scam

You might get a phone call in which the caller tells you that someone has stolen your Social Security number and is using your number to commit crimes. This is a scam. The Social Security Administration notifies people of essential information by regular mail, not by calling people on the phone.

The caller will try to get you to give private information. Again, this is a scam. The Social Security Administration does not call people and ask for personal information.

These callers often threaten people that there is a warrant for their arrest and the only way to keep from getting arrested and thrown into jail, is to give them the personal information they want. Only con artists make these threats. The Social Security Administration does not call people and threaten to arrest them and throw them into jail.

For your peace of mind: if you get a call like this, hang up right away, then go to your local Social Security office to make sure that there are no issues with your Social Security number.

Jury Duty Scam

You get a phone call from someone pretending to work at the police department or sheriff’s office. The caller accuses you of missing jury duty and says that there is a warrant for your arrest. You must pay a fine to people who pretend to be the police.

This is a scam. Courts send notifications of jury duty by mail. Courts also do not telephone people to demand payments. Courts send notices of fines by mail. The police and sheriff’s department do not call people to collect fine payments.

For your peace of mind: hang up right away. if someone calls you with this scheme. Contact the jury administrator of your local country courthouse to see if you missed jury duty.

These crooks prey on your fear of getting arrested, even when you know you did nothing wrong. The fraudsters will bully, harass, and threaten you to try to steal your money. You cannot talk them out of what they are doing or get them to admit that they are committing a crime. Your best option is to hang up immediately, then contact the relevant legitimate government agency to verify that what the caller said was false.

References:

AARP. “How to Recognize a Robocall.” (accessed May 2, 2019) https://www.aarp.org/money/scams-fraud/info-2019/recognize-a-robocall.html

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How Do I Lessen the Chance of My Children Fighting at My Death?

There are several actions that a parent can take to decrease the chance of a fight after her death, says nj.com in its recent article, “My brothers might start a fight over mom’s will. What can she do about it?”

Trying to decide how to divide property is a common estate planning challenge. Some people decide inheritances should be split among heirs equally, with the same amount left to each heir. Others decided to divide their estate “equitably,” in some other way that is considered fair.

It may not be clear if the parent is looking to leave her only daughter the house and other assets to her sons, or if she plans to distribute her assets unevenly. If the home is valued similarly to whatever other assets the parent is leaving her sons, there may not be a fight.

However, if the house represents most of the parent’s net worth and the sons’ inheritances will be much smaller, it could create hard feelings.

The brothers can’t contest the will simply because they think the inheritance is unfair. In New Jersey, the primary reasons to contest a valid will are either because the decedent lacked testamentary capacity or was subject to undue influence.

An attorney can help draft a will that will prepare in advance for either of these grounds for a will contest. As far as testamentary capacity is concerned, an attorney should test the parent before allowing her to sign the will.

Another option would be for the parent to tape a video that shows her signing the will. This would make it more difficult for her sons to claim she didn’t have mental capacity.

The parent can also include language in the will explaining why the inheritance isn’t equal. If they see the reasoning behind her decision—and it’s rational—they may be less likely to allege undue influence.

She may want to prepare a letter of intent to explain her reasoning. This is not a legal document but may be helpful, if the will is contested.

Another option is a no-contest clause. However, these are frowned upon in New Jersey. A no-contest clause states that if an heir challenges the will and loses, then he or she will get nothing.

Another option would be for the parent to change the deed to her house to a life estate deed.

An estate planning attorney needs to be consulted to prepare the estate plan with the mother, so that she can be sure that her wishes are followed. The attorney will also be able to provide some helpful insight on the family dynamic.

Reference: nj.com (May 3, 2019) “My brothers might start a fight over mom’s will. What can she do about it?”

Key Terms: Inheritance, Estate Planning Lawyer, Will Contest, Undue Influence

What is Congress Doing for Seniors?

House Majority Leader Steny Hoyer, a Democrat from Maryland, informed the House Democratic Caucus in an April 25th “Dear Colleague” letter that he intends to bring H.R. 1994, the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019, to the House floor in May.

Think Advisor’s recent article, “SECURE Act to Get House Vote in May,” explains that the SECURE Act passed the House Ways and Means Committee on April 2. There’s been action on the companion bill—the Retirement Enhancement and Savings Act (RESA) of 2019. That legislation has yet to be scheduled by the Senate Finance Committee.

In discussing the actions taken during the first 100 days of the 116th Congress, Representative Hoyer said that the House will soon take up H.R. 9, the Climate Action Now Act, “to affirm the principles of the Paris Climate Agreement, in spite of President Trump’s pledge to withdraw the United States.”

Hoyer signaled that a vote on the SECURE Act would follow “over the coming work period,” and noted that with the flood insurance program set to expire at the end of May, “I expect the House to take action to address that as well.”

Hoyer said in the next few weeks, “as committees continue to markup legislation, the House will also take up legislation to strengthen the Affordable Care Act and to address rising prescription drug costs.”

Another possibility for consideration in May by the full House is Financial Services Committee Chairwoman Maxine Waters’ Consumers First Act, H.R. 1500. That bill passed out of that committee on March 28. Waters’ bill is aimed at reversing the damage done to the Consumer Financial Protection Bureau, under former acting director Mick Mulvaney.

The Senior Security Act of 2019 would require the SEC to create a Senior Investor Taskforce. That bill could be up for a House vote very soon. The House docket also has a resolution on Supporting the Protection of Elders Through Financial Literacy.

The bill includes a provision requiring law enforcement and regulatory agencies to work together to understand and detect elder frauds and scams.

Reference: Think Advisor (April 29, 2019) “SECURE Act to Get House Vote in May”

Suggested Key Terms: Legislation, Elder Law Attorney, Elder Abuse, Financial Abuse

Estate Planning Hacks Create More Problems

The estate planning attorney in this gentleman’s neighborhood isn’t worried about this rancher’s plan to avoid the “courtroom mumbo jumbo.” It’s not the first time someone thought they could make a short-cut work, and it won’t be the last. However, as described in the article “Estate planning workaround idea needs work” from My San Antonio, the problems this rancher will create for himself, his wife, and his children, will easily eclipse any savings in time or fees he thinks he may have avoided.

Let’s start with the idea of putting all the man’s assets in his wife’s name. For starters, that means she has complete control and access to all the accounts. Even if the accounts began as community property, once they are in her name only, she is the sole manager of these accounts.

If the husband dies first, she will not have to go into probate court. That is true. However, if she dies first, the husband will need to go to probate court to access and claim the accounts. If the marriage goes sour, it’s not likely that she’ll be in a big hurry to return access to everything.

Another solution: set the accounts up as joint accounts with right of survivorship. The bank would have to specify that when spouse dies, the other owns the accounts. However, that’s just one facet of this estate planning hack.

The next proposal is to put the ranch into the adult children’s names. Gifting the ranch to children has a number of irreversible consequences.

First, the children will all be co-owners. Each one of them will have full legal control. What if they don’t agree on something? How will they break an impasse? Will they run the ranch by majority rule? What if they don’t want to honor any of the parent’s requests or ideas for running the ranch?  In addition, if one of them dies, their spouse or their child will inherit their share of the farm. If they divorce, will their future ex-spouse retain ownership of their shares of the ranch?

Second, you can’t gift the ranch and still be an owner. The husband and wife will no longer own the ranch. If they don’t agree with the kid’s plans for the ranch, they can be evicted. After all, the parents gave them the ranch.

Third, the transfer of the ranch to the children is a gift. There will be a federal gift tax return form to be filed. Depending on the value of the ranch, the parents may have to pay gift tax to the IRS.  Because the children have become owners of the ranch by virtue of a gift, they receive the tax-saving “free step-up in basis.” If they sell the ranch (and they have that right), they will get hit with capital gains taxes that will cost a lot more than the cost of an estate plan with an estate planning attorney and the “courtroom mumbo jumbo.”

Finally, the ranch is not the children’s homestead. If it has been gifted it to them, it’s not the parent’s homestead either. Therefore, they can expect an increase in the local property taxes. Those taxes will also be due every year for the rest of the parent’s life and again, will cost more over time than the cost of creating a proper estate plan. Since the ranch is not a homestead, it is subject to a creditor’s claim, if any of the new owners—those children —have a financial problem.

We haven’t even mentioned the family business succession plan, which takes a while to create and complements the estate plan. Both plans exist to protect the current owners and their heirs. If the goal is to keep the ranch in the family and have the next generation take the reins, everyone concerned be better served by sitting down with an estate planning attorney and discussing the many different ways to make this happen.

Reference: My San Antonio (April 29, 2019) “Estate planning workaround idea needs work”

Suggested Key Phrase: Estate Planning, Family Business, Joint Ownership, Heirs, Federal Gift Tax Return, Step Up In Basis, Capital Gains Taxes

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