How Do I Plan for a Blended Family?

A blended family (or stepfamily) can be thought of as the result of two or more people forming a life together (married or not) that includes children from one or both of their previous relationships, says The Pittsburgh Post-Gazette in a recent article, “You’re in love again, but consider the legal and financial issues before it’s too late.”

Research from the Pew Research Center study reveals a high remarriage rate for those 55 and older—67% between the ages 55 and 64 remarry. Some of the high remarriage percentage may be due to increasing life expectancies or the death of a spouse. In addition, divorces are increasing for older people who may have decided that, with the children grown, they want to go their separate ways.

It’s important to note that although 50% of first marriages end in divorce, that number jumps to 67% of second marriages and 80% of third marriages end in divorce.

So if you’re remarrying, you should think about starting out with a prenuptial agreement. This type of agreement is made between two people prior to marriage. It sets out rights to property and support, in case there’s a divorce or death. Both parties must reveal their finances. This is really helpful, when each may have different income sources, assets and expenses.

You should discuss whose name will be on the deed to your home, which is often the asset with the most value, as well as the beneficiary designations of your life insurance policies, 401(k)s and individual retirement accounts.

It is also important to review the agents under your health care directives and financial powers of attorney. Ask yourself if you truly want your stepchildren in any of these agent roles, which may include “pulling the plug” or ending life support.

Talk to an experienced estate planning attorney about these important documents that you’ll need, when you say “I do” for the second (or third) time.

Reference: Pittsburgh Post-Gazette (February 24, 2019) “You’re in love again, but consider the legal and financial issues before it’s too late”

What Do Parents Need to Know About Writing a Will?

Who wants to think about their own mortality? No one. However, it’s a fact of life. Failing to plan for your eventual death by preparing a will—especially as a parent—can result in issues for your loved ones. If you die without a will, it can mean conflict among your survivors, as they attempt to see how best to divide up your assets.

Fatherly’s recent article, “How to Write a Will: 8 Tips Every Parent Needs to Know” says that families can battle over big assets like cars to small assets like a collection of supposedly rare books. They can fight over anything and everything. Therefore, remember to prepare and sign a last will and testament to dispose of your property the way you want.

Dying without a will means your estate will be disposed of according to the intestacy laws. That could leave your loved ones in the lurch. For instance, in some states, your spouse may only get half your estate, with the remainder going to your parents.

Writing a will is essential, and you should not try to do it yourself. Instead, hire an experienced estate planning lawyer. Along with this, keep these items in mind.

Plan for Every Scenario. When doing your estate planning, consider the various scenarios and contingencies that can happen after you’re gone. A well prepared will includes when and where you want your assets to go. Be wise in how to distribute your assets, to whom they will be going and the timing.

Family Dynamics. You must be very specific when drafting up a will, especially if family circumstances are unique, such when there are children from previous marriages who aren’t legally adopted by a spouse. They could be disinherited. Work with an attorney to make sure they receive what you intend with specific details. If you and your partner aren’t legally married, your significant other could find himself or herself disinherited from your assets after you’re dead.

Designating Your Children’s Guardian. If you don’t name a guardian for your children (in cases of either single parenthood or where both parents pass away), the state will determine who gets your children.

Specificity. Your will is a chance to say who gets what. If you want your brother to get the baseball card collection, you should write it down in your will or it’s not enforceable. In some states, you can attach a written list of these personal items to your will.

Health Care. Begin planning your will when you’re healthy so that, in the event of disaster, you will have a financial power of attorney and a health care agent in place. If you become too ill to make decisions yourself, you’ll need to appoint someone to make those decisions for you.

Rules for Minors. Minors can own property, but they’ll have no control over it until they turn 18. If parents leave their home to their minor child, the surviving spouse will have issues if they want to sell it. Likewise, if a child is named the beneficiary of a life insurance policy, IRA, or 401(k), those assets will go into a protected account.

Don’t Do It Yourself. This cannot be emphasized enough. It’s tempting to create a will from a generic form online. But this may be a recipe for disaster. If your will is drafted poorly, your family will suffer the consequences. Generic forms found online are just that—generic. Families are not generic. Work with an experienced estate planning attorney to help you with what can be a complex process.

Reference: Fatherly (February 6, 2019) “How to Write a Will: 8 Tips Every Parent Needs to Know”

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Empty Nest? Time to Focus on the Nest Egg

After decades devoted to rearing children, it happens: parents realize that they’ve neglected their own retirement savings. Once the nest empties out, says USA Today, it’s time to refocus on building up savings accounts. How do you do it? The answers are in the article “5 ways empty nesters can boost their savings and turbocharge their 401(k)s.”

Here’s a five-step plan for making this happen.

Up the savings side. Once you’re not spending cash on your kids for clothes, college funds, cars and car insurance, that cash can move into retirement savings. The maximum for a 401(k) in 2019 is $19,000, and if you are over age 50, you can add $6,000 as a “catch-up” contribution. For annual IRA contributions, the limit is $5,000 with a catch-up of $1,000. Increase your paycheck deductions to the percentage, that will get you to the IRS limits. Put savings first.

If there’s a match, don’t miss it. Lucky enough to work for a company that matches all or part of your retirement savings? Do whatever you can to take full advantage of that free money. The most common company match is 50 cents per dollar on 6% of pay, according to Vanguard Group, which says that 70% of 401(k) plans had this match in place in 2017. Let’s say you earn $75,000 and save 6% of your pay. The company would give you $2,250, which means you’d be boosting your savings to $6,750.

Max out savings. The more money that is saved, the faster the nest egg grows. A married couple that socks away a combined $50,000 in pretax dollars every year in their 401(k)s, can find themselves with an additional $250,000 in five years. That’s not counting company matches or any investment growth.

Catch-up as fast as you can. Over 50? The IRS promotes savings by allowing catch-up contributions. An additional $6,000 is allowed in a 401(k). Parents who were paying for summer sleep away camp or riding lessons, can move those dollars into their own retirement accounts.

Control spending. The natural inclination when cash flow loosens up, is to spend more. Many people decide to live it up during these years, feeling like they deserve to enjoy themselves after dedicating so many years to their children. There’s a balance that needs to be found between enjoying and over-spending. Most families increase their retirement savings when the children are gone, but not by enough. Ramping up spending, instead of saving, means years of missed opportunities to build your retirement accounts.

The best advice is to take the long view. Savings instead of putting a convertible in the garage or taking lavish vacations, when a more modest approach is equally enjoyable, could change the nature of your retirement.

Reference: USA Today (Jan. 14, 2019) “5 ways empty nesters can boost their savings and turbocharge their 401(k)s”