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Avoid Reverse Mortgage Scams

What Should I Know about Reverse Mortgage Scams?

What Should I Know about Reverse Mortgage Scams?

A reverse mortgage is a loan that gives seniors access to the equity they have built up in their home (it is the property’s current value, less any outstanding loans or liens) without having to sell it. The borrower gets in effect, a tax-free advance on their equity, as a line of credit, fixed monthly payments, or a lump sum. For many reverse mortgages, you must use the proceeds to pay off your existing mortgage. The remainder of the loan comes due when the owner moves, sells the house, or passes away.

AARP’s recent article entitled “Reverse Mortgage Scams” explains that reverse mortgages are available to homeowners age 62 and over. Reverse mortgages are complicated, and they can be risky. Scammers try to take advantage of this complexity to entice older homeowners into fraudulent deals. They market reverse mortgages to seniors as “investment seminars” and as the solution for financial issues. These fraudsters also claim that they provide “free” income or a way to delay filing for Social Security.

A team of crooks may include unethical mortgage brokers or financial advisers, who work with corrupt appraisers, attorneys and loan officers. They present an inflated appraisal of a home’s value to the senior. This inflates the equity and the potential loan, then they try to get the owner to take out a reverse mortgage. The team will do the paperwork, close the loan and come up with an excuse to get the money or even take title to the house.

These fraudsters might try to sell you on a purported can’t-miss investment or financial product. Some scammers prey on financially strapped homeowners, saying that a reverse mortgage can help them avoid foreclosure or get out of debt. They will charge fees up to thousands of dollars to provide info about reverse mortgages that is actually available for free from the federal government.

Other convoluted cons use reverse mortgages as a way to conceal property flipping. These scammers will buy a rundown house and crate bogus documents to make the dump look more valuable. They’ll find a senior to purchase it using a type of reverse mortgage that can be put toward a home purchase, or offer it as a “free home,” in which they transfer the title for little or no money, if the target agrees to get a reverse mortgage. When the deal’s settled, the crooks take the loan money and the victims are left with the shack.

Here are some warning signs. Watch out for a broker or lender who uses high-pressure tactics to try to talk you into a reverse mortgage. You should also avoid a salesperson who says the loan is safe because it is insured by the Federal Housing Administration (the FHA does insure some reverse mortgages, but that coverage does not protect the borrower only the lender in a default). It is also important to be beware, if they don’t disclose the fees, conditions and risks that are associated with a reverse mortgage, including the possible loss of your home, which serves as collateral.

Reference: AARP (December 2020) “Reverse Mortgage Scams”

Read more related articles at:

Beware of These Reverse Mortgage Scams

Avoid reverse mortgage shopping scams

Also, read one of our previous Blogs at:

Will a Reverse Mortgage Help Me in Retirement?

Click here to check out our On Demand Video about Estate Planning.

How to Help your Parents Retire

Have Your Parents Planned Carefully for Retirement?

Have Your Parents Planned Carefully for Retirement?

The self-employed are not alone. In fact, this lack of retirement planning is a crisis that most Americans are facing. The Fed’s 2018 Report on the Economic Well-Being of U.S. Households found that 25% of U.S. adults have no retirement savings. In addition, just 36% percent of non-retired adults say their retirement savings are on track. With this in mind, Nasdaq’s recent article asks “Do Your Parents Know How to Plan Retirement?”

It might, therefore, be time to ask your parents if they have a plan for their retirement. The faster you know about this, the sooner you can address this problem, so they can actually enjoy their Golden Years without burdening your family.

First, remember that Social Security is expected to be depleted by 2035, so that may need to be part of the planning. Social Security also only provides a similar standard of living for those in the lowest quartile of income earners in the U.S. Thus, unless their household is earning less than $30,000 a year, your parents will need to look to personal savings to keep their current standard of living in retirement.

Added to this is the fact that Medicare won’t cover assisted living, so that’s another topic in your discussion about your parents’ retirement. Here is a list of questions you might want your parents to answer:

  • What are your retirement plans and are you on the right path?
  • What are your sources of retirement income?
  • Do you have debt?
  • What insurance do you have (life, long-term care, Medicare)?
  • If you were unable to live in your current location, where would you want to live?

You should also talk to your siblings and spouse, so everyone is on the same page. Then, ask your parents if they’d be willing to share documents, like bank accounts, wills and trusts. Other information includes the following:

  • Health and long-term care insurance policies
  • Investments, pensions and details on Social Security
  • Estate planning documents, such as a durable power of attorney, a health care proxy and a living will; and
  • Mortgage and other outstanding debts.

With this information, you can help them create a budget to maximize their savings for retirement.

As you are helping your parents, be sure you are not putting your own retirement in jeopardy. Take care of your priorities and build your own savings. Then, if you’re comfortable and have the means, you can assist them financially.

Reference: Nasdaq (Dec. 29, 2020) “Do Your Parents Know How to Plan Retirement?”

Read more related articles at:

Six Steps to Having a Retirement Conversation with Parents

Retirement: How to preserve it while helping your parents

How to Help Your Parents Retire Without Derailing Your Own Retirement

Also, read one of our previous Blogs at:

Retirement Planning and Declining Abilities

Click here to check out our On Demand Video about Estate Planning.

Charitable Trust

How Does a Charitable Trust Work?

How Does a Charitable Trust Work?

A charitable trust can provide an alternative to meeting your wishes for charities and your loved ones, while serving to minimize tax liabilities. There are pros and cons to consider, according to a recent article titled “Here’s how to create a charitable trust as part of an estate plan” from CNBC. Many families are considering their tax planning for the next few years, aware that the individual income tax provisions of the 2017 Tax Cuts and Jobs Act will expire after 2025.

Creating a charitable trust may work to achieve wishes for charities, as well as loved ones.

A charitable trust is a set of assets, usually liquid, that a donor signs over to or uses to create a charitable foundation. The assets are then managed by the charity for a specific period of time, with some or all of the interest the assets produce benefitting the charity.

When the period of time ends, the assets, now called the remainder, can go to heirs, or can be donated to the charity (although they are usually returned to heirs).

There are pros and cons to Charitable Remainder Trusts and Charitable Lead Trusts. Your estate planning attorney will determine which one, if any, is appropriate for you and your family.

A charitable trust allows you to give generously to an organization that has meaning to you, while providing an equally generous tax break for you and your heirs. However, to achieve this, the charitable trust must be irrevocable, so you can’t change your mind once it’s set in place.

Charitable trusts provide a way to ensure current or future distributions to you or to your loved ones, depending on your unique circumstances and goals.

A Charitable Remainder Trust, or CRT, provides an income stream either to you or to individuals you select for a set period of time, which is typically your lifetime, your spouse’s lifetime, or the lifetimes of your beneficiaries. The remaining assets are ultimately distributed to one or more charities.

By contrast, the Charitable Lead Trust (CLT) pays income to one or more charities for a set term, and the remaining assets pass to individuals, such as heirs.

For CRTs and CLTs, the annual distribution during the initial term can happen in two ways; a Unitrust (CRUT or CLUT) or an Annuity Trust (CRAT or CLAT).

In a Unitrust, the income distribution for the coming year is calculated at the end of each calendar year and it changes, as the value of the trust increases or decreases.

In an Annuity Trust, the distribution is a fixed annual distribution determined as a percentage of the initial funding value and does not change in future years.

Interest rates are a key element in determining whether to use a CLT or a CRT. Right now, with interest rates at historically low levels, a CRT yields minimal income.

The key benefits to a CRT include income tax deductions, avoidance of capital gains taxation, annual income and a wish to support nonprofit organizations.

Your estate planning attorney and a member of the development team from the charity can work together to ensure that your charitable strategy achieves your goals of supporting the charity and building your legacy.

Reference: CNBC (Dec. 22, 2020) “Here’s how to create a charitable trust as part of an estate plan”

Read more related articles at:

What Is a Charitable Trust?

What is a charitable trust and why would I need one?

Also read one of our previous Blogs at:

George Michael’s Charity Continues

Click here to check out our On Demand Video about Estate Planning.

Home Care

Helping Elderly Parents to Live Safely at Home

Helping Elderly Parents to Live Safely at Home

In some instances, it can be a very fast aging process from active senior to an elderly person who needs care. Their physical appearance or mental acuity may rapidly decline, and you may be certain that you need help to keep them living safely at home. However, for some, the deterioration may be gradual and more subtle.

Tapinto.net’s recent article entitled “Caring for Elderly Parents: Can They Live Safely at Home?” says that, no matter their physical and mental status, most seniors want to remain in their homes rather than move in with family or to a care facility. However, aging parents may require care to keep them safe and to manage their daily living activities. This responsibility frequently is given to the adult children, regardless of whether they are ready for this task.

If you’ve determined that your parent needs assistance to stay safe and independent at home, but you’re not sure if you and other family members can handle the caregiving responsibilities, here are some thoughts to help you. First, speak with your parents and help them realistically assess their living situation. Discuss all issues candidly and address any problems. Look at these specifics:

Safe living environment. Seniors are frequently injured in and around their homes by common hazards and poor lighting that cause falls.

Finances. Review the financial situation of your parents to be certain you understand all sources of income, assets and debts. Review the level of medical and insurance coverage. You should also see if each of your parents have a will, living will and power of attorney. Make sure that you know the location of these key documents. If they do not have these documents, help them find an experienced estate planning or elder law attorney to draft them.

Mental and physical health. See if your parents have any changes in their physical and mental health. Review the medications that your parents are taking and consult their health care providers regarding any specific requirements. Make certain they have had basic vaccinations.

The ability of the family to provide assistance. Have a frank discussion with siblings and nieces and nephews about their ability to provide the level or kind of care that your aging parents need. Caring for elderly parents can be overwhelming. Know that you may need support to avoid caregiver burnout.  There are also professionals who can help your parents with activities of daily living (ADLs), personal care and companionship services. Home health aides or certified nursing assistants provide help with ADLs that may include assistance with:

  • Bathing, grooming, using the toilet and dressing
  • Meal planning and preparation
  • Light housekeeping, laundry and running errands
  • Medication reminders and picking up prescriptions
  • Hobbies and exercise; and
  • Companionship, transportation and help getting to appointments.

Reference: Tapinto.net (Nov. 11, 2020) “Caring for Elderly Parents: Can They Live Safely at Home?”

Read more related articles at:

Caring For Elderly Parents: Can They Live Safely At Home?

How to Make a Home Safe for Your Aging Parent

Also, read one of our previous Blogs at:

Can I Afford In-Home Elderly Care?

Click here to check out our On Demand Video about Estate Planning.

Willy Wonka

Who Makes Money from Charlie and the Chocolate Factory?

Who Makes Money from Charlie and the Chocolate Factory? The heartwarming drama is fictional, even though the two writers did once meet, says The Express in its recent article entitled “Roald Dahl inheritance: Who is raking in fortunes made from Dahl books & films?”

Roald was a mere lad and Beatrix was in her 60s, when the two authors briefly met one another. Dahl’s books and films are classics and are constantly being revamped and reimagined 30 years after his death.

But with Roald no longer around, Who Makes Money from Charlie and the Chocolate Factory? Roald died in 1990 at age 74 and was believed to have a net worth of $10 million.

The lion’s share of his income from films, books and merchandise is managed by his estate.

The latest data from Roald Dahl’s estate shows annual pre-tax profits of about $17 million in 2018.

This income is from television and film deals, royalties, fancy-dress costumes and a line of baby toiletries.

After Roald’s death, his widow Felicity inherited the majority of the $3.75 million he left in his will. This is worth nearly $6.75 million in today’s dollars.

Every year, fans commemorate Roald Dahl Day to celebrate his stories and their characters. Held on the anniversary of his birth—September 13—his books, films and characters are celebrated.

The author spent four hours every day writing stories from his garden shed. In all, Roald wrote at least 36 books, including James and the Giant Peach, Matilda, The Twits and Fantastic Mr Fox. His works continue to be popular for film and stage adaptations.

A new version of The Witches, starring Anne Hathaway, was released earlier this year, while Hollywood stars including Johnny Depp, Mark Rylance and Danny DeVito have all appeared in film versions of his stories.

Reference: The Express (UK) (Dec. 12, 2020) “Roald Dahl inheritance: Who is raking in fortunes made from Dahl books & films?”

Read more related articles at:

Estate seeks to bring Roald Dahl’s work to new generations

Celebrated author made a fortune off of writing for Hollywood — which is the only reason he did it.

Also, read one of our previous Blogs at:

Celebrity Estates: Battle Over Inheritances

Click here to check out our On Demand Video about Estate Planning.

EP Planning Pandemic

What Kind of Estate Planning Do I Need During the Pandemic?

What Kind of Estate Planning Do I Need During the Pandemic?

Having a valid will and a complete estate plan is important for everyone, but it’s crucial as you approach retirement.

Richmond Times-Dispatch’s recent article entitled “Estate planning during the pandemic” says that it’s because you’ll probably have more assets at this stage of your life, and it’s important to consider whom you’d like to inherit.

It is critical that you plan to be sure your spouse and family will be cared for financially, in the event that something happens to you. This can be accomplished with proper estate planning with the help of an experienced estate planning attorney.

If you die without a will or estate plan, state probate laws of succession may direct the way in which your assets are distributed. This can be an expensive process, but it can also be a significant burden on your family during a time of grieving and sadness.

Even with a will, going through the court-supervised probate process of passing assets through a will can be time consuming and expensive.

One way to avoid probate is to ask an experienced estate planning attorney to help you set up a trust. A frequently used trust is a revocable living trust, which lets you modify the terms if you like.

Individuals with children or real estate can particularly benefit from setting up a trust. A trust allows you to avoid probate and makes certain that your assets are transferred to the intended people. It also lets you control exactly how the money can be used. You can also name someone to take control when you’re not available, known as a secondary trustee.

The executor of a will is really an administrator who transfers assets from one person to another. In contrast, a trustee is more of a decision-maker who will take your place and make decisions you would want to make, if you were still around to make them.

After you set up your estate plan, you should review it every few years.

Reference: Richmond Times-Dispatch (Nov. 19, 2020) “Estate planning during the pandemic”

Read more related articles at:

Estate Planning During the Pandemic

How To Make Your Estate Plan Amid The Coronavirus Pandemic

Also, read one of our previous Blogs at:

How Can Estate Planning Protect Me from COVID-19?

Click here to check out our On Demand Video about Estate Planning.

Blended Families

How Can Blended Families Use Estate Planning to Protect All of the Siblings?

If two adult children in a blended family receive a lot more financial help from their parent and stepparents than other children, there may be expectations that the parent’s estate plan will be structured to address any unequal distributions. This unique circumstance requires a unique solution, as explained in the article “Estate Planning: A Trust Can Be Used to Protect Blended Families” from The Daily Sentinel. Blended families in which adult children and stepchildren have grandchildren also require unique estate planning.

Blended families face the question of what happens if one parent dies and the surviving step parent remarries. If the deceased spouse’s estate was given to the surviving step parent, will those assets be used to benefit the deceased spouse’s children, or will the new spouse and their children be the sole beneficiaries?

In a perfect world, all children would be treated equally, and assets would flow to the right heirs.  However, that does not always happen. There are many cases where the best of intentions is clear to all, but the death of the first spouse in a blended marriage change everything.

Other events occur that change how the deceased’s estate is distributed. If the surviving step-spouse suffers from Alzheimer’s or experiences another serious disease, their judgement may become impaired.

All of these are risks that can be avoided, if proper estate planning is done by both parents while they are still well and living. Chief among these is a trust,  a simple will does not provide the level of control of assets needed in this situation. Don’t leave this to chance—there’s no way to know how things will work out.

A trust can be created, so the spouse will have access to assets while they are living. When they pass, the remainder of the trust can be distributed to the children.

If a family that has helped out two children more than others, as mentioned above, the relationships between the siblings that took time to establish need to be addressed, while the parents are still living. This can be done with a gifting strategy, where children who felt their needs were being overlooked may receive gifts of any size that might be appropriate, to stem any feelings of resentment.

That is not to say that parents need to use their estate to satisfy their children’s expectations. However, in the case of the family above, it is a reasonable solution for that particular family and their dynamics.

A good estate plan addresses the parent’s needs and takes the children’s needs into consideration. Every parent needs to address their children’s unique needs and be able to distinguish their needs from wants. A gifting strategy, trusts and other estate planning tools can be explored in a consultation with an experienced estate planning attorney, who creates estate plans specific to the unique needs of each family.

Reference: The Daily Sentinel (Dec. 16, 2020) “Estate Planning: A Trust Can Be Used to Protect Blended Families”

Read more related articles at:

3 Ways to Estate Plan with Blended Families

Alternative inheritance strategies for blended families

Also, read one of our previous blogs at:

How Blended Families Can Address Finances and Inheritance Issues

Click here to check out our On Demand Video about Estate Planning.

 

Robert Redford

Did Robert Redford Have a Business Exit Plan?

Did Robert Redford Have a Business Exit Plan?

Motley Fool’s recent article titled “What Robert Redford’s Sale of Sundance Can Teach Investors About Exit Planning” says that, in announcing the sale, Redford told the Salt Lake Tribune that he’s been thinking of selling for several years. However, he wanted to find the right partners. Broadreach and Cedar plan to upgrade the resort, add hotel rooms and build a new inn. The companies have also said that they will keep the resort sustainable and practicing measured growth, as well as also continuing to host the Sundance Film Festival.

The 2,600-acre resort has 1,845 acres of land saved from future development through a conservation easement and protective covenants. The 84-year-old actor has had a lifelong interest in the environment and in land stewardship. Redford and his family have also arranged with Utah Open Lands to create the Redford Family Elk Meadows Preserve at the base of Mt. Timpanogos. The gift will reduce Redford’s tax liability on his estate.

Both Broadreach and Cedar have extensive hospitality experience, but neither looks to have much ski resort experience. However, they’re working with Bill Jensen, an industry legend, who recently left his role as CEO of Telluride Ski and Golf Resort in Colorado.

Business exit and succession planning can be difficult—in part, because people don’t like to address such unwelcome topics. Most investors don’t have the luxury of waiting years to find the right buyer, but the Redford deal does show that planning ahead may be critical to creating a mechanism that supports the vision for the property.

When selling a large investment property, you must first understand why you’re selling, and your desired end result. Of course, a return on investment is nice, but there may be other considerations, like in Redford’s case. Another key is ascertaining the updated worth of what you’re selling. Get a valuation, especially with an irreplaceable asset.

The structure of the sale is important. You will likely be liable for tax on your capital gains, so ask an attorney. If you’re also structuring your estate plans at the same time, you’ll need to know what amount you can give and what your heirs may have to pay. Talk to an experienced estate planning attorney to be certain that you’re covering all the bases.

Reference: Motley Fool (Dec. 12, 2020) “What Robert Redford’s Sale of Sundance Can Teach Investors About Exit Planning”

Read more related articles at:

How Can I Easily Pass My Home to My Only Child?

How Can I Easily Pass My Home to My Only Child?

This estate planning issue concerns a single retired parent of an only adult daughter and how to transfer the home to the daughter. Should the daughter simply sell the house when her mother dies, or should the daughter be added to the deed now while her mother is alive?

Also, is there a court hearing?

In many states, there is no reason or requirement to go before a judge to probate your estate, says nj.com in its recent article “Should I add my daughter’s name to my home’s deed?”

In estate planning, there are two primary questions to answer about the transfer of the home. First, there would possibly be some significant capital gains if the mom adds her daughter to the deed prior to death.

Also, if the mother winds up requiring Medicaid, Medicaid might put a lien against the home after she dies for the value of the services it provided.

Generally, when a home has been owned for a long time, the mother should try to preserve the step-up in basis for tax purposes that happens, if the real estate is still in the mom’s name at her passing.

Whether that step up is preserved, depends on how the daughter is added to the deed.

Adding the daughter as a joint tenant or tenant in common won’t preserve the step-up basis for taxes. Ask an elder law attorney what this means in your specific situation.

A better option may be to transfer the remainder interest in the property to the daughter in this scenario and withhold a life estate for the mom.

That will preserve the step-up in basis at death.

This can also get complicated when there’s an outstanding mortgage, so speak to an experienced elder law or estate planning attorney.

Reference: nj.com (Dec. 15, 2020) “Should I add my daughter’s name to my home’s deed?”

Read more related articles here:

Four ways to pass down your family home to your children

How to Pass Your Home to Your Children Tax-Free

Also, read one of our previous blogs at:

Is Transferring House to Children a Good Idea?

Click here to check out our On Demand Video about Estate Planning.

 

Vietnam Vets

Will Vietnam Vets with Serious Illnesses Get Presumptive Benefit Status in the Defense Budget Bill?

Will Vietnam Vets with Serious Illnesses Get Presumptive Benefit Status in the Defense Budget Bill?

 

Will Vietnam Vets with Serious Illnesses Get Presumptive Benefit Status in the Defense Budget Bill? If passed into law, the requirement would have the VA start granting fast-track disability status for roughly 34,000 veterans suffering from the three conditions. It would also be a major victory for veterans advocates, who have pushed for the change for many years.

Military Times’ recent article entitled “Vietnam veterans with bladder cancer, other serious illnesses would get presumptive benefit status in final defense budget bill” reports that the policy bill still faces a veto threat from President Trump on some unrelated issues.

VA officials have resisted the action to grant presumptive benefits status in recent years, while they conduct additional scientific research into the connection between the illnesses and exposure to chemical defoliants during the Vietnam War. Internal documents also show disagreements within the Trump administration over adding new Agent Orange-connected diseases.

Earlier research from the National Academies of Sciences, Engineering and Medicine linked the medical problems to Agent Orange exposure. However, Office of Management and Budget officials have questioned the validity of those findings, in light of the potential expense of new disability payouts.

House Armed Services Committee Chairman Adam Smith said the new veterans’ benefit was a win on “an extremely important issue.”

“The VA, I think, has been unfairly treating this issue for years and denying people coverage that they ought to have, saying things that can clearly be linked to Agent Orange exposure were not,” he said in an interview Wednesday.

“This will give people the coverage that they deserve, for what happened with Agent Orange exposure, and I think that’s huge.”

The issue of presumptive benefits status has been controversial in the veteran community for a long time. In most instances, veterans must prove (usually with a medical exams and service records) that their injuries and illnesses are associated with their service to receive disability benefits. However, in conflicts like Vietnam, where the chemical defoliant Agent Orange was used across the country with little clear record of when U.S. troops were exposed, the federal government has made exceptions to the standards of proof.

Now, those vets who served in the country and later suffered a series of 14 illnesses known to be connected to the chemical exposure receive presumptive exposure status and need not provide additional documentation to apply for benefits.

The new legislation will help roughly 34,000 vets who aren’t currently receiving full disability payouts. That will cost about $8 billion over the next 10 years.

President Trump has threatened to veto the bill because of provisions to rename bases honoring Confederate leaders, calling it an attack on U.S. military history. Nonetheless, lawmakers included the provision in their final draft. He also insisted on language in the authorization bill repealing legal protections for social media companies, since their conduct has become a national security issue. However, legislators rejected that notion. They said it was not relevant to the military budget measure and because it was not included in the separate drafts adopted in the House and Senate earlier this year.

Reference: Military Times (Dec. 2, 2020) “Vietnam veterans with bladder cancer, other serious illnesses would get presumptive benefit status in final defense budget bill”

Read More related articles at:

Vietnam veterans with bladder cancer, other serious illnesses would get presumptive benefit status in final defense budget bill

Defense Bill Would Add 3 New Diseases to Agent Orange Presumptive Conditions List

Also, read one of our previous Blogs at:

What Are the New Rules for Veterans’ Benefits?

Click here to check out our On Demand Video about Estate Planning.