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end of life planning

End-Of-Life Planning Is A ‘Lifetime Gift’ To Your Loved Ones

End-Of-Life Planning Is A ‘Lifetime Gift’ To Your Loved Ones

Talking about death makes most of us uncomfortable, so we don’t plan for it.

That’s a big mistake, because if you don’t have an end-of-life plan, your state’s laws decide who gets everything you own. A doctor you’ve never met could decide how you spend your last moments, and your loved ones could be saddled with untangling an expensive legal mess after you die.

Betsy Simmons Hannibal, a senior legal editor , puts it this way: Planning for the end of life isn’t about you. “You’re never going to really get the benefit of it. So you might as well think about how it’s going to be a lifetime gift that you’re giving now to your parents or your partner or your children. It really is for the people you love.”

Here are some simple, practical steps to planning for the end of life. These tips aren’t meant to be legal or medical advice, but rather a guide to ease you into getting started.

1. Name an executor.

If you’re an adult, you should have a will, says Hannibal. Estate planning is not just for the rich. “It’s not just about the value of what you own. It’s also the feelings that you and your loved ones have about what you own.” If you own lots of valuable stuff — real estate, trust funds, yachts — you probably need a lawyer.

She says the first thing you do is name (in writing) a person whom you trust to take care of everything when you die. In most states that person is called an executor; in some they’re called a personal representative.

Hannibal says it’s a good idea to choose someone from your family. “The most important thing is that you have a good relationship with them — and also that they have a good attention to detail, because it’s a lot of work to be someone’s executor.”

An executor would have to, for example, find all your financial assets and communicate with everyone you’ve named in your will. It’s a big ask, so Hannibal says just be upfront. She suggests asking the person directly, “Would you be comfortable wrapping up my estate when I die?”

2. Take an inventory.

List everything you own, not just things that are financially valuable — such as your bank accounts, retirement savings or car — but also those things that have sentimental value: a music or book collection, jewelry, furniture. Then list whom you want to leave what to.

If you have young children, name a guardian for them. Choose carefully, because that person will be responsible for your child’s schooling, health care decisions and value system.

Hannibal says pets are considered property under the law, so she suggests naming a new owner so that the state doesn’t do it for you.

Digital accounts are also part of your property. This includes social media accounts, online photos, everything in, say, your Google Drive or iCloud, online subscriptions, dating site profiles, credit card rewards, a business on Etsy or Amazon. Hannibal suggests keeping a secure list of all those accounts and the login and password details. Let your executor know where the list is.

Just as you write out specific instructions about your physical belongings, be clear about what you’d like to happen with your online information.

She says it’s better not to have a handwritten will, because proving you wrote it will require a handwriting expert. So keep it simple. Just type out your wishes and have two witnesses watch you sign and date it. Then have them do the same. Hannibal says by signing it, “they believe that the person who made the will is of sound mind, and that’s a pretty low bar.”

You don’t need to file your will anywhere; neither do you need to get it notarized for it to be legally binding. And don’t hide it. Hannibal says just tell your executor where you’ve kept a copy.

Remember that your decisions will change over time. So if you have a child, buy a house or fall out with a family member, update your will.

3. Think about health care decisions.

Your will takes care of what happens after you die. An advance directive is a legal document that covers health care and protects your wishes at the end of your life.

There are two parts to an advance directive. The first is giving someone your medical power of attorney so the person can make decisions for you if you can’t. The other part is called a living will. That’s a document where you can put in writing how you should be cared for by health professionals.

She has seen thousands of situations of loved ones making difficult and emotional decisions around a hospital bed. It’s worse when family members disagree about a course of action.

You know the saying “The best time to plant a tree was 20 years ago. The second best time is now”? Zitter says with the coronavirus in the news every day, more people are realizing that these end-of-life conversations are important. “That tree was always important to plant. But now we really have a reason to really, really plant it. … That time is now.”

4. Name a medical proxy.

Pallavi Kumar is a medical oncologist and palliative care physician at the University of Pennsylvania. Kumar says the most important medical decision you can make is to choose a person who can legally make health care decisions for you if you can’t. This person is sometimes called a medical proxy or a health care agent. Naming the person is the first part of the advance directive.

“Think about the person in your life who understands you, your goals, your values, your priorities and then is able to set aside their own wishes and be a voice for you,” she says. You want someone you trust who can handle stress, in case your loved ones disagree on what to do.

5. Fill out a living will.

After you’ve chosen your medical proxy (and named a backup), you need to think about what kind of care you want to receive. There’s no right or wrong; it’s very personal. The document that helps you do that is called a living will. It’s part two of the advance directive.

A living will addresses questions such as “Would you want pain medication?”; “Do you want to be resuscitated?”; and “Would you be OK being hooked up to a ventilator?”

Kumar says she asks her patients what’s important to them and what their goals are. For some with young children, it means trying every treatment possible for as long as possible, no matter how grueling.

Other patients might want the exact opposite. “They would say, ‘I’ve gone through a lot of treatments and I … feel I’m not having as many good days with my kids. So if the disease gets worse, I want to spend that time at home.’ ”

Kumar says even among patients who are very sick with cancer, fewer than half have had conversations about how they want to die. So talk about your wishes. Once you’ve filled out the advance directive forms, share your decisions with your medical proxy, your loved ones and your doctor.

6. Don’t forget the emotional and spiritual aspects of death.

How you want to die is personal and about much more than just the medical aspect. For some, it’s about being at peace with God; for others, it’s being kept clean. Still others don’t want to be left alone, or they want their pets close by.

Angel Grant and Michael Hebb founded the project Death Over Dinner to make it easier for people to talk about different aspects of death as they eat. “The dinner table is a very forgiving place for conversation. You’re breaking bread together. And there’s this warmth and connection,” says Grant.

Grant says reflecting on death automatically forces you to think about your life. “That’s the magic of it,” she says.

“We think it’s going to be morbid and heavy. But what these conversations do is they narrow down our understanding of what matters most to us in this life, which then gives us actionable steps to go forward living.”

Grant doesn’t believe a “good death” is an oxymoron. “A good death is subjective, but there are some things that I have heard over and over again for many years at death dinners. … A good death is being surrounded by love, knowing you have no emotional or spiritual unfinished business.”

Read more related articles at:

Hard Conversations About End Of Life Wishes: Should Young Adults Be Included?

Getting Your Affairs in Order

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

Click here for a short informative video from our own Attorney Bill O’Leary.

Life Insurance and taxes

How to Avoid Taxation on Life Insurance Proceeds

How to Avoid Taxation on Life Insurance Proceeds

By BRIAN BEERSUpdated December 12, 2021

Reviewed by

Here, we show you some ways to reduce the taxes on your estate and ensure that your heirs will benefit from it as much as possible.

One of the benefits of owning lifee insurance is the ability to generate a large sum of money payable to your heirs upon your death. An even greater advantage is the federal income-tax-free benefit that life insurance proceeds receive when they are paid to your beneficiary. However, while the proceeds are income-tax-free, they may still be included as part of your taxable estate for estate tax purposes.

Section 2042 of the Internal Revenue Code states that the value of life insurance proceeds insuring your life are included in your gross estate if the proceeds are payable: (1) to your estate, either directly or indirectly, or (2) to named beneficiaries if you possessed any incidents of ownership in the policy at the time of your death.1

Using an Ownership Transfer to Avoid Taxation

For those estates that will owe taxes, whether life insurance proceeds are included as part of the taxable estate depends on the ownership of the policy at the time of the insured’s death. If you want your life insurance proceeds to avoid federal taxation, you’ll need to transfer ownership of your policy to another person or entity.

Here are a few guidelines to remember when considering an ownership transfer:

  1. Choose a competent adult/entity to be the new owner (it may be the policy beneficiary), then call your insurance company for the proper assignment, or transfer of ownership, forms.
  2. New owners must pay the premiums on the policy. However, you can gift up to $15,000 per person in 2021 ($16,000 for 2022), so the recipient could use some of this gift to pay premiums.4
  3. You will give up all rights to make changes to this policy in the future. However, if a child, family member, or friend is named the new owner, changes can be made by the new owner at your request.
  4. Because ownership transfer is an irrevocable event, beware of divorce situations when planning to name the new owner.
  5. Obtain written confirmation from your life insurance company as proof of the ownership change.

Using Life Insurance Trusts to Avoid Taxation

A second way to remove life insurance proceeds from your taxable estate is to create an irrevocable life insurance trust (ILIT). To complete an ownership transfer, you cannot be the trustee of the trust and you may not retain any rights to revoke the trust. In this case, the policy is held in trust and you will no longer be considered the owner. Therefore, the proceeds are not included as part of your estate.

Why choose trust ownership rather than transferring ownership to another person? One reason might be that you still wish to maintain some legal control over the policy. Or perhaps you are afraid that an individual owner may fail to pay premiums, whereas in the trust you can ensure that all premiums are paid promptly.

If the beneficiaries of the proceeds are minor children from a previous marriage, an ILIT will allow you to name a trusted family member as trustee to handle the money for the children under the terms of the trust document.

Regulations on Life Insurance Policy Ownership

The IRS has developed rules that help to determine who owns a life insurance policy when an insured person dies. The primary regulation overseeing proper ownership is known in the financial world as the three-year rule, which states that any gifts of life insurance policies made within three years of death are still subject to federal estate tax.5

This applies to both a transfer of ownership to another individual and the establishment of an ILIT. So, if you die within three years of the transfer, the full amount of the proceeds is included in your estate as though you still owned the policy.5

The IRS will also look for any incidents of ownership by the person who transfers the policy. In transferring the policy, the original owner must forfeit any legal rights to change beneficiaries, borrow against the policy, surrender or cancel the policy, or select beneficiary payment options.

Furthermore, the original owner must not pay the premiums to keep the policy in force. These actions are considered to be a part of the ownership of the assets and if any of them are carried out, they can negate the tax advantage of transferring them.

However, even if a policy transfer meets all of the requirements, some of the transferred assets may still be subject to taxation. If the policy’s current cash value exceeds the $15,000 gift tax exclusion for 2021 ($16,000 for 2022), gift taxes will be assessed and will be due at the time of the original policyholder’s death.6

The Bottom Line

It’s not uncommon for individuals to be insured under a life insurance policy for $500,000 to several million in death benefits. Once you add in the value of your home, your retirement accounts, savings, and other belongings, you may be surprised by the size of your estate. If you factor in more years of growth, some individuals may be facing an estate tax issue.

A viable solution to this is to maximize your gifting potential and to transfer policy ownership whenever possible at little or no gift-tax cost. As long as you live another three years after the transfer, your estate could save a significant amount of tax.

Read more related articles here:

Are Life Insurance Proceeds Taxable? Cases in Which Life Insurance is Taxed

Myth: Life Insurance is NOT Taxable

Also, Read one of our previous blogs here:

Is Life Insurance Taxable?

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

 

is Life Insurance Taxable?

Is Life Insurance Taxable?

Is Life Insurance Taxable?

AmyDanise

Editor

Updated: Apr 20, 2021, 4:27am

Compare Life Insurance Companies

Is Life Insurance Taxable? Compare Policies With 8 Leading Insurers. One of the primary upsides to life insurance is that the payout is made to your beneficiaries tax-free. Since life insurance death benefits can be in the millions of dollars, it’s a significant advantage to buying (and receiving) life insurance.

But there are other aspects to life insurance that won’t get past the tax man. Here’s a look at when to prepare for a tax bill.

You Withdraw Money from Cash Value

If you have a cash value life insurance policy, you can generally access the money through a withdrawal or loan, or by surrendering the policy and ending it.

One of the reasons to buy cash value life insurance is to have access to the money that builds up within the policy. When you pay premiums, the payments generally go to three places: cash value, the cost to insure you, and policy fees and charges. Money within the cash value account grows tax-free, based on the interest or investment gains it earns (depending on the policy). But once you withdraw the money, you could face a tax bill.

Money that’s withdrawn is generally made up of two parts:

  • Money that came from premium payments you made. This component of a withdrawal is not taxable. In the life insurance industry this part is called the “policy basis.”
  • Money that came from interest or investment gains. This portion is subject to income taxes. Your life insurance company will be able to tell you what amount in a withdrawal is “above basis” and taxable.

If your life insurance policy is a “modified endowment contract,” or MEC, different tax rules apply and it’s best to consult a financial professional to understand tax implications.

You Surrender the Policy

There can be times when a policy owner no longer wants or needs the life insurance policy. You can take the surrender value of the policy, and the insurer will terminate the coverage. The amount you receive is your cash value minus any surrender charge. You can generally expect to get a surrender charge within the first 10 or 20 years of owning the policy, and over the course of time the surrender charge phases out.

You won’t be taxed on the entire surrender value, though. You’ll be taxed on the amount you received minus the policy basis. This taxable amount reflects the investment gains that you took out.

You Took Out a Policy Loan and the Life Insurance Ends

If you have a policy with cash value and take out a loan against it, the loan isn’t taxable –as long as the policy is in-force. But if the policy terminates before you’ve paid the loan back, you could get a tax bill. For example, if you surrender the policy or it lapses, the coverage terminates.

The taxable amount is based on the amount of the loan that exceeds your policy basis. Remember, policy basis is the portion you’ve paid in as premiums. Amounts “above basis” are based on interest or investment gains on cash value.

One way to access all your cash value and avoid taxes is to withdraw the amount that’s your policy basis — this is not taxable. Then access the rest of the cash value with a loan — also not taxable.

Compare Life Insurance Companies

Compare Policies With Leading Insurers

You Sell the Life Insurance Policy

There’s a market for existing life insurance policies, especially cash value life insurance policies that insure people who are terminally ill or have short life expectancies. Transactions involving terminally ill policy owners are called “viatical settlements.” These involve an investor, such as a company specializing in buying policies, paying you money for the policy, becoming the policy owner, and then making the life insurance claim when you pass away.

Viatical settlements are typically used as a way for patients to get money for medical bills, especially when selling a life insurance policy will mean getting more money than simply surrendering it for the cash value.

Fortunately, the IRS doesn’t treat any portion of what you receive for a viatical settlement as taxable. Under IRS code 101(g)(2), an amount paid by a viatical settlement provider is treated like a payment of the death benefit — and death benefit payouts are not taxable.

life settlement is a similar transaction but involves a policy owner who is not terminally ill. In these cases the IRS does not see the proceeds as a payment of death benefit. A portion of what you receive can be taxable.

You Are Life Insurance Beneficiary Who Receives Interest on a Death Benefit

Most life insurance payouts are made in one lump sum right after the death of the insured person. But some beneficiaries choose to delay the payout, or choose to take the payout in installments over time. When these delayed payouts include interest from the life insurer, the interest can be taxable.

The Life Insurance Payout Goes Into a Taxable Estate

Most life insurance payouts are made tax-free directly to life insurance beneficiaries. But if a beneficiary was not named, or is already deceased, where does the life insurance death benefit go? It goes into the estate of the insured person and can be taxable along with the rest of the estate.

This could create a significant tax bill, especially considering both federal and state estate taxes. While federal estates taxes will not tax the first $11.7 million per individual (in 2021), state estate taxes can have significantly lower exemption levels.

Another possible unhappy scenario is that an estate is below the exemption level but a large life insurance payout into the estate pushes it above the exemption threshold into taxable territory.

This should all be avoidable by naming both primary and contingent life insurance beneficiaries, and keeping those selections up to date.

Summary: When Is Life Insurance Taxable?

Situation What part could be taxable?
You withdraw money from cash value Any amount you receive above “policy basis”
You surrender a policy for cash Any amount you receive above “policy basis”
You take a loan against the cash value None, as long as the policy remains in-force
You sell the policy through a viatical settlement None
You’re a beneficiary who receives a life insurance payout plus interest The interest amount
The life insurance payout goes into your estate Any amount of the estate that’s subject to state or federal estate taxes.
You sell your life insurance in a viatical settlement None

Read more related articles at:

How to avoid the federal estate tax when collecting life insurance proceeds

Taxes on life insurance: Here’s when proceeds are taxable

Also, Read one of our previous blogs at:

How Can Life Insurance Help My Estate Plan?

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

Baby Boomers

WILL BABY BOOMERS HAVE ANYTHING LEFT TO PASS DOWN?

WILL BABY BOOMERS HAVE ANYTHING LEFT TO PASS DOWN?

Written By: The American Academy of Estate Planning Attorneys

The Baby Boomer generation – the largest generation in American history to date – is heading into retirement, but are they prepared? More importantly for their children and grandchildren – and possibly the economy as a whole – will there be anything left to bequeath when they pass away? It appears some Baby Boomers have planned for their retirement, however, estate planning is not a priority for many. As a result, this may be the first generation where the transfer of wealth cannot be predicted.

Boomers Begin to Retire

The oldest of the Baby Boomer generation began to retire just a few years ago, in 2011. It is estimated that just over 65 million Baby Boomers are currently in or heading for retirement. How they will fare during their “Golden Years” remains to be seen based on evidence that indicates many failed to plan ahead for their retirement years. Worse still, those who did plan for their retirement years may not have estate planning in place.

Why Didn’t Boomers Plan for Retirement?

The obvious question is why didn’t Baby Boomers focus as much on retirement planning as generations before them did? Several factors appear to have caused this lack of planning phenomenon, the first of which is the Boomers’ spending habits. The generation that gave birth to the Boomers, lived through the Great Depression, World War II, and the Korean War. Not only was the economy far from stable, but the entire world was frequently unstable for that generation. Consequently, they learned to be frugal, plan ahead, and depend only on themselves. By contrast, the Baby Boomers grew up during the Cold War, which was a time of relative peace and a more predictable economy. The result was what is often referred to as the “Me-Generation.” Boomers embraced the idea of spending on credit and, consequently, racked up mountains of debt that many are bringing with them into retirement. Instead of saving every dollar that wasn’t absolutely needed for necessities like the previous generation, the Boomers are notorious for spending now and worrying about saving later. The problem is that later, is now.

Another reason why many Baby Boomers did not save for retirement is they are counting on a sizeable inheritance that will create the cushion they need for their retirement years. Over 20 years ago, a study compiled by Robert Avery and Michael Rendall for Cornell University, concluded the generation that gave birth to the Boomers will pass on to their children and grandchildren an inheritance worth more than $10.4 trillion. That’s a sizeable amount, however, what if that inheritance doesn’t come through as expected? Poor estate planning, long-term care costs, or simply living longer than expected could all cause a long-awaited inheritance to dwindle to almost nothing by the time it gets passed down.

The Great Wealth Transfer

Despite the lack of retirement planning, Boomers are retiring in huge numbers. They will be passing down what is left of their estates over the next several decades. Financial experts are bracing for what they predict will be the largest transfer of wealth in history. Those same experts tell us that roughly $30 trillion will change hands over the next few decades as Baby Boomers pass down their estates to Gen-Xers and Millennials. The problem, however, is that while Baby Boomers took a somewhat lackadaisical approach to retirement planning, many of them ignored estate planning altogether. A recent article by Forbes magazine suggests that 51 percent of Americans aged 55-64 and 62 percent aged 45-54 don’t have Wills. Consequently, a significant portion of that wealth could be lost prior to, or during, the wealth transfer unless Boomers start focusing on their estate plans.

Why Is Estate Planning So Important for Baby Boomers?

One of the biggest factors affecting Baby Boomers and the transfer of their wealth, is the double-edged sword of longevity. Americans are living, on average, almost twice as long at the beginning of the 21st century as they did at the beginning of the 20th century. While a longer life is certainly something to look forward to, it also raises practical and financial concerns. Baby Boomers are expected to spend considerably more time and money in long-term care before they pass. Nationwide, the average cost of a month in long-term care is over $6,800 and the average length of stay is 2.5 years. Without a plan to pay for that care, a substantial portion of a retiree’s nest egg can be lost to nursing home costs. Boomers will also waste a considerable amount of money on probate if they continue to shrug off the need for comprehensive estate planning. The end result is that unless Boomers start to pay attention to the need for estate planning, the Great Wealth Transfer might not be so “Great” after all.

The Good News – It Isn’t Too Late for Baby Boomers to Focus on Estate Planning

Although it is always best to start estate planning early on in life, it is never too late to benefit from a well-thought-out estate plan. For Baby Boomers heading into retirement, there are several important ways in which estate planning can help them hold onto their wealth. Incorporating Medicaid planning into an estate plan is imperative for anyone who is close to, or in, retirement. When added into an estate plan far enough ahead of time, Medicaid planning can protect estate assets and ensure eligibility for Medicaid benefits that will help cover the cost of long-term care. Probate avoidance strategies can also save an estate both time and money. Using a Trust instead of a Will to transfer major assets can save fees and costs associated with probate and ensure that beneficiaries have access to assets immediately after death. A Trust is also a great way to prepare for incapacity, which affects most Americans during their lifetime.

For Baby Boomers, it is not too late to protect your assets and focus on estate planning. The key is to consult with an experienced estate planning attorney sooner rather than later.

Read more related articles at:

Baby Boomers May Be the First Generation Not to Pass Wealth On to Children, Survey Says.

Millions of baby boomers are getting caught in the country’s broken retirement system

Also, read one of our previous Blogs at:

The Aging of America: Will the Baby Boom Be Ready for Retirement?

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

Selling your Life Insurance Policy

Should I Sell My Life Insurance Policy?

Should I Sell My Life Insurance Policy?

It is quite common to buy life insurance. It may have been to protect your family financially or as a vehicle to provide liquidity for estate taxes. As we grow older and laws change, it is critical to determine if your policy has outlived its intended purpose. The traditional strategy of “buy and hold” no longer applies to the ever-changing world. Today, it may be a good idea to consider selling your policy.

Forbes’ recent article entitled “What You Should Know Before Selling Your Old Life Insurance Policy” explains that a lesser-known alternative to abandoning or surrendering a policy is known as a life settlement. This gives the policy owners the chance to get a much bigger cash lump sum, than what is provided by the life insurance carrier’s cash surrender value.

Life settlements are not new. Third-party institutional buyers have now started to acquire ownership of policies, in exchange for paying the owner a lump sum of cash. As a consequence, the policy owner no longer needs to make future premium payments.

The policy buyer then owns the life insurance policy and takes on the responsibility of future premium payments. They also get the full death benefit payable from the life insurance carrier when the insured dies.

Research shows that, on average, the most successful life settlement deals are with policies where the insured is age 65 or older. Those who are younger than 65 usually require a health impairment to receive a life settlement offer.

Knowing what your life insurance policy is worth is important, and its value is based on two primary factors: (i) the future projected premiums of the policy; and (ii) the insured’s current health condition.

Many policy owners don’t have the required experience with technical life expectancies, actuarial tables and medical knowledge to properly evaluate their life settlement value policies. This knowledge gap makes for an imbalance, since inexperienced policy owners may try to negotiate against experienced and sophisticated policy buyers trying to acquire the policy at the lowest possible cost.

To address this imbalance, the policy owner should seek help from an experienced estate planning attorney to help them with the process to sell the policy for the highest possible price.

If you have an old life insurance policy that’s collecting dust, ask an experienced estate planning attorney to review the policy’s importance and purpose in your portfolio. This may be the right time to turn that unneeded life insurance policy into cash.

Reference: Forbes (Jan. 26, 2021) “What You Should Know Before Selling Your Old Life Insurance Policy”

Read more related articles at:

5 Tips for Selling Your Life Insurance

Can you sell your life insurance policy?

Also, Read one of our previous Blogs at :

Is Life Insurance a Good Idea for My Estate Plan?

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

DEATH OF SPOUSE

How Do You Plan for the Death of a Spouse?

How Do You Plan for the Death of a Spouse?

The COVID pandemic has become a painful lesson in how important it is to having estate plans in order, especially when a spouse becomes sick, incapacitated, or dies unexpectedly. With more than 400,000 Americans dead from the coronavirus, not every one of them had an estate plan and a financial plan in place, leaving loved ones to make sense of their estate while grieving. This recent article from Market Watch titled “How to get your affairs in order if your spouse is dying” offers five things to do before the worst occurs.

Start by gathering information. Make all of your accounts known and put together paperwork about each and every account. Look for documents that will become crucial, including a durable power of attorney, an advanced health care directive and a last will. Gather paperwork for life insurance policies, investment portfolios and retirement accounts. Create a list of contact information for your estate planning attorney, accountant, insurance agent, doctors and financial advisors and share it with the people who will be responsible for managing your life. In addition, call these people, so they have as much information as possible—this could make things easier for a surviving spouse. Consider making introductions, via phone or a video call, especially if you have been the key point person for these matters.

Create a hard copy binder for all of this information or a file, so your loved ones do not have to conduct a scavenger hunt.

If there is an estate plan in place, discuss it with your spouse and family members so everyone is clear about what is going to happen. If your estate plan has not been updated in several years, that needs to be done. There have been many big changes to tax law, and you may be missing important opportunities that will benefit those left behind.

If there is no estate plan, something is better than nothing. A trust can be done to transfer assets, as long as the trust is funded properly and promptly.

Confirm beneficiary designations. Check everything for accuracy. If ex-spouses, girlfriends, or boyfriends are named on accounts that have not been reviewed for decades, there will be a problem for the family. Problems also arise when no one is listed as a beneficiary. Beneficiary designations are used in many different accounts, including retirement accounts, life insurance policies, annuities, stock options, restricted stock and deferred compensation plans.

Many Americans die without a will, known as “intestate.” With no will, the court must rely on the state’s estate laws, which does not always result in the people you wanted receiving your property. Any immediate family or next of kin may become heirs, even if they were people you with whom you were not close or from whom you may even have been estranged. Having no will can lead to estate battles or having strangers claim part of your estate.

If there are minor children and no will to declare who their guardian should be, the court will decide that also. If you have minor children, you must have a will to protect them and a plan for their financial support.

Create a master list of digital assets. These assets range from photographs to financial accounts, utility bills and phone bills to URLs for websites. What would happen to your social media accounts, if you died and no one could access them? Some platforms provide for a legacy contact, but many do not. Prepare what information you can to avoid the loss of digital assets that have financial and sentimental value.

Gathering these materials and having these conversations is difficult, but they are a necessity if a family member receives a serious diagnosis. If there is no estate plan in place, have a conversation with an estate planning attorney who can advise what can be done, even in a limited amount of time.

Reference: Market Watch (Jan. 22, 2021) “How to get your affairs in order if your spouse is dying”

Read more related articles here:

‘When life goes sideways’ – how to prepare for the death of a spouse

Death Of A Spouse Planning Tips

Also, read one of our previous blogs here:

What Do I Need to Do after the Death of My Spouse?

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

Spouse dying in hospital

Get Estate Plan in Order, If Spouse Is Dying from a Terminal Illness

Get Estate Plan in Order, If Spouse Is Dying from a Terminal Illness

Thousands of people are still dying from COVID-19 complications every day, and others are dealing with life-threatening illnesses like cancer, heart attack and stroke. If your spouse is ill, the pain is intensified by the anticipated loss of your life partner.

Wealth Advisor’s recent article entitled “Your Spouse Is Dying: 5 Ways To Get Your Estate In Order Now,” says that it’s frequently the attending physician who suggests that your spouse get his affairs in order.

Your spouse’s current prognosis and whether he or she’s at home or in a hospital will determine whether updates can be made to your estate plan. If it has been some time since the two of you last updated your estate plan, you should review the planning with your elder law attorney or estate planning attorney to be certain that you understand it and to see if there are any changes that can and should be made. There are five issues on which to focus your attention:

A Fiduciary Review. See who’s named in your estate planning documents to serve as executor and trustee of your spouse’s estate. They will have important roles after your spouse dies. Be sure you are comfortable with the selected fiduciaries, and they’re still a good fit. If your spouse has been sick, you’ve likely reviewed his or her health care proxy and power of attorney. If not, see who’s named in those documents as well.

An Asset Analysis. Determine the effect on your assets when your partner dies. Get an updated list of all your assets and see if there are assets that are held jointly which will automatically pass to you on your spouse’s death or if there are assets in your spouse’s name alone with no transfer on death beneficiary provided. See if any assets have been transferred to a trust. These answers will determine how easily you can access the assets after your spouse’s passing.

A Trust Assessment. Any assets that are currently in a trust or will pass into a trust at death will be controlled by the trust document. See who the beneficiaries are, how distributions are made and who will control the assets.

Probate Prep. If there’s property solely in your spouse’s name with no transfer on death beneficiary, those assets will pass according to his or her will. Review the will to make sure you understand it and whether probate will be needed to settle the estate.

Beneficiary Designation Check. Make certain that beneficiaries of your retirement accounts and life insurance policies are current.

If changes need to be made, an experienced elder law or estate planning attorney can counsel you on how to best do this.

Reference: Wealth Advisor (Jan. 26, 2021) “Your Spouse Is Dying: 5 Ways To Get Your Estate In Order Now”

Read more related articles at:

How to get your affairs in order if your spouse is dying

Planning During Terminal Illness

Caring for someone with a terminal illness: Planning for deterioration and death

Also, read one of our previous Blogs at:

Surviving Spouse Needs An Estate Plan

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

 

 

Scariest issues of Retirement

What are the Scariest Statistics for Retirement?

What are the Scariest Statistics for Retirement?

Think Advisor’s recent article entitled “11 Scariest Retirement Statistics: 2020” says that there is a lack of preparation, savings difficulty and general uncertainty that American retirees are facing. Here are those scary stats:

  1. Just a quarter of Americans are on a trajectory to maintain their lifestyles in retirement. The other 75% will need to work longer, move to lower-cost housing and cut spending to maintain their standard of living, largely due to the coronavirus downturn.
  2. The Social Security trust funds would be empty by 2023, without the payroll tax. While President Trump let employers temporarily defer the employee portion of payroll taxes, he said the deferred taxes could later be forgiven, or the cut made permanent. When he signed the order, he vowed to “terminate the tax,” if reelected. Republican lawmakers subsequently debuted a plan to fund any shortfalls from the Treasury.
  3. Social Security benefits will be decreased by 21% if the trust fund runs out. Congress will have to intercede, or it could happen 10 years from now, if not sooner.
  4. Those born in 1960 will have a big problem because of the complicated formula the Social Security Administration uses to calculate benefits. Pre-retirees born in 1960 will see a nearly 15% cut to their lifetime benefits from Social Security when it’s time to collect. If the pandemic suppresses the economy into 2022, those cuts will impact more pre-retirees. The impact to their Social Security benefits will also be permanent.
  5. The 2021 Social Security cost of living adjustment, or COLA, will be just 1.3%. Retirees should note that rising health care costs and a potential 6% increase in Medicare Part B premiums may absorb that benefit increase.
  6. More than 50% of Americans think the economy is worse now than in 2008, with 51% of Americans seeing the COVID slowdown as worse than the 2008 recession. A survey from Edelman Financial Engines also found that 26% had withdrawn money from retirement or savings for living expenses.
  7. About 60% of retirement savers have fallen behind, according to a TIAA study. Among these, 30% said it was directly due to the pandemic.
  8. Internet searches for “move out of the U.S.” have increased 16 times. International Living magazine says it had seen the jump in search traffic around the phrase since May. A total of 20% of respondents in a survey it conducted also said they wanted to move due to the pandemic. However, just 45% cited a desire to save money.
  9. Approximately 42% of investors sold stock, and most of them (88%) of them regretted it. In response to the drop in stocks in mid-March last year, 42% of investors in a survey by MagnifyMoney sold at least one stock and 24% sold all their holdings. About 69% of those who sold stock at the start of the pandemic greatly regretted it, and 19% said they were somewhat regretful.
  10. Roughly 80% of older Americans don’t understand retirement planning and don’t know the basics of how to successfully plan for a financially secure retirement, according to a study by The American College of Financial Services. The survey also found only 30% of respondents had a plan in place to fund long-term care needs, and just one in four actually had long-term care insurance.
  11. About 3 million workers may have been driven into early retirement due to the pandemic. From March to August of 2020, 2.8 million older workers might have been pushed out of their jobs prematurely, with economic turmoil and poor health making it hard for them to resume their careers elsewhere, according to by the Schwartz Center for Economic Policy Analysis at the New School. The report found that 38% of unemployed older adults stopped looking for work and left the workforce, and an additional 1.1 million were expected to do likewise.

Reference: Think Advisor (Oct. 30, 2020) “11 Scariest Retirement Statistics: 2020”

Read more related articles at:

Scary Statistics on Retirement Readiness

15 Scary Retirement Statistics

Also, read one of our previous Blogs at:

How Do I Include Retirement Accounts in Estate Planning?

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

Corona 3

Did the Pandemic Put a Premium on Estate Planning?

Did the Pandemic Put a Premium on Estate Planning?

The number of life insurance applications from people under age 44 increased by more than 7% in 2020, according to the MIB Group, a data sharing service for insurance companies, which tracks life insurance applications.

NBC News’ recent article entitled “Americans flocked to buy life insurance, prepare wills and trusts last year” says that life insurance applications for the age group had been mostly down over the last several years. So, that’s a big increase.

There are a number of factors that contributed to the spike, but experts point to the pandemic and the insurance awareness it brought on.

People are looking at mortality like they’ve never looked at it before, especially younger adults. Those who felt invincible have been shaken by COVID-19. They now realize we are all mortal.

With millions of jobs lost during the early stages of the pandemic, many workers had to leave behind their employer-paid life insurance through their employee health benefits packages. Roughly 54% of Americans had life insurance earlier this year, most of them through their employers.

Overall, insurance applications are up by 4% this year. Northwestern Mutual, the nation’s largest seller of life insurance last year, sold 15% more life insurance policies from April to September, compared to the same time last year, CNBC reported in October.

Other companies also saw their applications grow.

In estate planning, the number of people drafting wills and trusts is also on the upswing because of the pandemic. A recent LegalZoom survey found that 32% of people ages 18 to 34 drafted wills because of COVID-19, and about 21% of that group did so because they knew someone who had contracted the virus.

Estate planning attorneys know that preparing for death can be cumbersome. However, as the pandemic has shown us, our demise can come at any time. We should all be prepared.

Reference: NBC News (Jan. 1, 2021) “Americans flocked to buy life insurance, prepare wills and trusts last year”

Read more related articles at:

Pandemic highlights importance of estate planning

Estate Planning In The Pandemic Age: It’s Time To Prepare For The Unexpected

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.

Estate Planning

Do We Need Estate Planning?

Do We Need Estate Planning?

Estate planning also referred to as an EP, is not just about making a will, nor is it just for people who live in mansions. It is best described in the title of this article “Estate planning is an important strategy for arranging financial affairs and protecting heirs—here are five reasons why everyone needs an estate plan” from Business Insider. Estate planning is a plan for the future, for you, your spouse and those you love.

There are a number of reasons for estate planning:

  • Avoiding paying more federal and state taxes than necessary
  • Ensuring that assets are distributed as you want
  • Naming the people you choose for your own care, if you become incapacitated; and/or
  • Naming the people you choose to care for your minor children, if you and your spouse left them orphaned.

If that sounds like a lot to accomplish, it is. However, with the help of a trusted estate planning attorney, an EP can provide you with the peace of mind that comes with having all of the above.

If those decisions and designations are not made by you while you are alive and legally competent, the state law and the courts will determine who will get your assets, raise your children and how much your estate will pay in death taxes to state and federal governments. You can avoid that with an EP.

Here are the five key things about estate planning:

It’s more than a will.  It includes creating Durable Powers of Attorney to appoint individuals who will make medical and/or financial decisions, if you are not able to do so. The estate plan also contains Medical Directives to communicate your wishes about what kind of care you do or do not want, if you are so sick you cannot do so for yourself. The estate plan is where you can create Trusts to control how property passes from one person or one generation to the next.

Estate planning saves time, money, and angst. If you have a surviving spouse, they are usually the ones who serve as your executor. However, if you do not and if you do not have an estate plan, the court names a public administrator to distribute assets according to state law. While this is happening, no one can access your assets. There’s a lot of paperwork and a lot of legal fees. With a will, you name an executor who will take care of and gain access to most, if not all, of your assets and administer them according to your instructions.

Estate planning includes being sure that investment and retirement accounts with a beneficiary designation have been completed. If you don’t name a beneficiary, the asset goes through the probate court. If you fail to update your beneficiary designations, your ex or a person from your past may end up with your biggest assets.

Estate planning is also tax planning. While federal taxes only impact the very wealthy right now, that is likely to change in the future. States also have estate taxes and inheritance taxes of their own, at considerably lower exemption levels than federal taxes. If you wish your heirs to receive more of your money than the government, tax planning should be part of your estate plan.

The estate plan is also used to protect minor children. No one expects to die prematurely, and no one expects that two spouses with young children will die. However, it does happen, and if there is no will in place, then the court makes all the decisions: who will raise your children, and where, how their upbringing will be financed, or, if there are no available family members, if the children should become wards of the state and enter the foster care system. That’s probably not what you want.

The estate plan includes the identification of the person(s) you want to raise your children, and who will be in charge of the assets left in trust for the children, like proceeds from a life insurance policy. This can be the same person, but often the financial and child-rearing roles are divided between two trustworthy people. Naming an alternate for each position is also a good idea, just in case the primary people cannot serve.

Estate planning, finally, also takes care of you while you are living, with a power of attorney and healthcare proxy. That way someone you know, and trust can step in, if you are unable to take care of your legal and financial affairs.

Once your  plan is in place, remember that it is like your home: it needs to be updated every three or four years, or when there are big changes to tax law or in your life.

Reference: Business Insider (Jan. 14, 2021) “Estate planning is an important strategy for arranging financial affairs and protecting heirs—here are five reasons why everyone needs an estate plan”

Read more related articles at:

Do you need an estate plan?

5 Reasons You Need an Estate Plan

Also, read one of our previous Blogs at:

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

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

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