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How Does the SECURE Act Change Your Estate Plan?
Living Trust

How Does the SECURE Act Change Your Estate Plan?

The SECURE Act has made big changes to how IRA distributions occur after death. Anyone who owns an IRA, regardless of its size, needs to examine their retirement savings plan and their estate plan to see how these changes will have an impact. The article “SECURE Act New IRA Rules: Change Your Estate Plan” from Forbes explains what the changes are and the steps that need be taken.

Some of the changes include revising wills and trusts which include provisions creating conduit trusts that had been created to hold IRAs and preserve the stretch IRA benefit, while the IRA plan owner was still alive.

Existing conduit trusts may need to be modified before the owner’s death to address how the SECURE Act might undermine the intent of the trust.

Rethinking and possibly completely restructuring the planning for the IRA account may need to occur. This may mean making a charity the beneficiary of the account, and possibly using life insurance or other planning strategies to create a replacement for the value of the charitable donation.

Another alternative may be to pay the IRA balance to a Charitable Remainder Trust (CRT) on death that will stretch out the distributions to the beneficiary of the CRT over that beneficiary’s lifetime under the CRT rules. Paired with a life insurance trust, this might replace the assets that will ultimately pass to the charity under the CRT rules.

The biggest change in the SECURE Act being examined by estate planning and tax planning attorneys is the loss of the “stretch” IRA for beneficiaries inheriting IRAs after 2019. Most beneficiaries who inherit an IRA after 2019 will be required to completely withdraw all plan assets within ten years of the date of death.

One result of the change of this law will be to generate tax revenues. In the past, the ability to stretch an IRA out over many years, even decades, allowed families to pass wealth across generations with minimal taxes, while the IRAs continued to grow tax tree.

Another interesting change: No withdrawals need be made during that ten-year period, if that is the beneficiary’s wish. However, at the ten-year mark, ALL assets must be withdrawn, and taxes paid.

Under the prior law, the period in which the IRA assets needed to be distributed was based on whether the plan owner died before or after the RMD and the age of the beneficiary.

The deferral of withdrawals and income tax benefits encouraged many IRA owners to bequeath a large IRA balance completely to their heirs. Others, with larger IRAs, used a conduit trust to flow the RMDs to the beneficiary and protect the balance of the plan.

There are exceptions to the 10-year SECURE Act payout rule. Certain “eligible designated beneficiaries” are not required to follow the ten-year rule. They include the surviving spouse, chronically ill heirs and disabled heirs. Minor children are also considered eligible beneficiaries, but when they become legal adults, the ten year distribution rule applies to them. Therefore, by age 28 (ten years after attaining legal majority), they must take all assets from the IRA and pay the taxes as applicable.

The new law and its ramifications are under intense scrutiny by members of the estate planning and elder law bar because of these and other changes. Speak with your estate planning attorney to review your estate plan to ensure that your goals will be achieved in light of these changes.

Reference: Forbes (Dec. 25, 2019) “SECURE Act New IRA Rules: Change Your Estate Plan”

 

Are You Forgetting this Estate Planning Document?
Advanced Healthcare Directives Are a Basic Part of Good Estate Planning

Are You Forgetting this Estate Planning Document?

Forbes’ recent article, “Two-Thirds Of All Americans Are Missing This Estate Planning Document,” explains that a health care directive is a legal document in which an individual writes down his decisions for caregivers in the event of illness or dementia and makes instructions about end of life decisions. It can also provide guidance on how caregivers should handle the body after death.

Health care directives are also called living wills, durable health care powers of attorney, or medical directives, but they all serve the same function, which is to provide guidance and direction on how a person’s medical and death decisions should be made.

Despite the importance of a health care directive, a 2017 study found that only 33% of all Americans have one.

A critical decision in a health care directive is selecting an agent. This is a proxy who acts on your behalf to make decisions that are consistent with your wishes. It’s important to pick an individual whose values are aligned with yours. This is your advocate on decisions, like if you want to have treatment continued or just be kept comfortable in palliative care.

Once you choose an agent, review your directive with her. This will give her guidance if and when the need for her to step in arises.

The agent’s role in the health care directive doesn’t end at death but continues to ensure that your post-mortem wishes are carried out. When the person dies, the agent takes control of the body. Prior to funeral plans, the agent must make certain that any organ donation wishes are carried out. This decision is usually shown on a person’s driver’s license, but it’s also re-stated in the health care directive.

After the donation wishes are carried out, the agent helps to make sure funeral wishes are handled properly. These instructions can be detailed in the health care directive.

With a health care directive put in place, you make things easier for your family and loved ones.

Good estate planning brings peace of mind.

Reference: Forbes (December 13, 2019) “Two-Thirds Of All Americans Are Missing This Estate Planning Document”

How Do I Tell If Dad Needs Caregiving Support?
Be Cognizant of Parents Who Need Caregiving Support

How Do I Tell If Dad Needs Caregiving Support?

When you’re visiting older family members, you have a chance to judge how they’re doing in terms of health, safety, and quality of life. AARP’s recent article, “5 Signs Your Loved One May Need Caregiving Support,” advises us that any of the following five red flags may indicate that your parent needs help.

  1. Falls and safety. Look for things like unsafe indoor or outdoor stairs, especially without railings or poor lighting, along with loose rugs, clutter, or a laundry room that makes your mom or dad carry laundry baskets up and down stairs. You should evaluate fall hazards with a certified aging in place specialist (CAPS), an aging life care specialist, or a physical or occupational therapist. They can help evaluate your parent’s needs, abilities and the home environment. Consider installing safety measures, such as ramps, handrails on both sides of stairs, grab bars in the bathroom, or a walk-in shower.
  2. Unfinished business. If you see a lot of unopened mail and unpaid bills, or key financial, home or legal documents that haven’t been addressed, your mom may be cognitively, physically, or emotionally unable to handle them. You may want to help your parent simplify her affairs or engage a financial manager. You can also volunteer to assist with the more complicated matters, while she continues handling day-to-day household and personal finances. You should also be sure your parent has advanced directives and other legal documents in place, so you are able to help manage her affairs in an emergency.
  3. Auto accidents and moving violations. When you see multiple accidents—even minor fender benders—or several warnings or citations, scrapes, or dents on the car, it’s time to discuss driving. You can ride along and observe any health issues causing problems like vision, hearing or cognitive changes. You can suggest that he refresh his driving skills by taking a driver safety course, or if it’s time to stop driving, give him other viable transportation options.
  4. Isolation. Does your mom appear to be disconnected from friends, family and community? If her support system seems to be deteriorating, her physical and mental well-being are at risk. Discover with whom she regularly interacts. Ask if she feels lonely. Look for some activities she’d enjoy and help make arrangements for ongoing participation and transportation. Regular phone calls can help her connect, as well as using technology, including video chat, online communities and social media.
  5. A change in appearance. If you notice a change in your mom’s appearance, like a big gain or loss of weight, wearing the same clothes every day, or lack of personal hygiene, or if she appears sad, anxious, and distressed or has sleep issues—something is not right. Propose a complete medical and psychological evaluation to determine what’s normal for her, because there may be several reasons for these changes. Depression or anxiety may call for treatment.

Review her medications with a pharmacist and set up a pill organizer for her. Find out how she’s making or receiving meals. If appropriate, arrange for caregiving support such as home-delivered meals, housekeeping, medication management and laundry assistance.

Tackle these conversations with love, concern, and a supportive attitude. Your objective is to help her remain as independent as possible, for as long as possible.

Is aging in place a reality or a dream?

Reference: AARP (December 12, 2019) “5 Signs Your Loved One May Need Caregiving Support”