Family Security Law Group, APC

Why Long-Term Care Insurance is Great for Protecting Your Assets

Long-term care (LTC) refers to a broad range of services that assist those with chronic conditions, such as cognitive impairment or a need of help to perform the essential activities of daily life (ADLs), such as dressing, bathing, eating, transferring in/out of a bed or chair, continence and toileting.

A U.S. Department of Health and Human Services report from September 2008 determined that about 70% of people over age 65 will require long-term care (LTC) services at some point, and some 40% will require nursing home care.

It's also expensive, saysnj.com, in the recent article, “Should we get long-term care insurance?”

Data from Genworth's 2017 Cost of Care Survey found the national median cost of an assisted living facility is $3,750 per month. A nursing home costs $8,010 per month. The cost is also typically more for those with dementia. According to the American Association for Long-term Care 2008 Sourcebook, more than half of people needing nursing home care require a stay of more than 12 months, with almost 25% staying more than three years. Those in the latter group, can really wreck a family's finances.

 In addition, most people don’t know that Medicare only covers a very narrow set of LTC costs. Similarly, Medicaid only covers those with very limited financial resources. For all but the extremely wealthy, long-term care insurance (LTCI) is a solution to defray the expense of home healthcare, assisted living, or nursing home care. Yes, it can be pricey.

Getting coverage when you are relatively young and still in good health helps to keep the costs down.

Some folks are worried they’ll be paying LTCI premiums for many years and die before they ever use the benefit. However,  we do the same type of thing for auto or homeowners insurance. Everyone gets this coverage because the financial risk of doing without is too great.

Insurance companies have combination life insurance/LTCI policies, called "hybrids," that address the fear of wasted premiums. With these hybrid policies, provided that the premium is paid for your lifetime, you or your heirs will receive the full policy benefit, as the life insurance death benefit, the LTC benefit, or a combination.

Reviewing LTCI options can be difficult, because of the number of policy variations. Speak with experienced professionals to get fully informed before making any decision.

Reference: nj.com (January 12, 2018) “Should we get long-term care insurance?”

Stepmothers Frequently Fight with Stepchildren on Estate Matters

“In all different cases — will contests, trust contests, life-estate challenges, probate objections, elder financial abuse, deed revocations or joint-tenancy quarrels — the interests and paths of stepmothers and stepchildren often collide.”

It’s not uncommon for conflicts to arise in estate matters between stepmothers and stepchildren, as tensions in blended families can carry over into disputes over an inheritance, beneficiary rights to a trust, or estate property.

Forbes’ recent article, “Stepmothers: The Cause Of So Many Estate Fights,” explains that this stepmother phenomenon in estate disputes starts with the fact that there’s a life expectancy gap in the U.S. between men and women. A man reaching 65 today can expect to live, on average, until 84; a woman turning the same age today can expect to live, on average, until 86. Widowed females also far outnumber widowed males (11.2 million vs. 2.9 million). When these widowed females and males have stepchildren, it is obvious that the number of surviving stepmothers heavily outweighs the number of surviving stepfathers.

It’s not surprising that research shows that only about 20% of adult stepchildren feel close to their stepmoms. Studies also show that stepmothers and their stepchildren don’t grow closer over time.

Inevitably, a large percentage of estates managed by a widowed stepmother with stepchildren heirs winds up in a fight over inheritance rights. Many of these arise after a short-term marriage where the decedent’s marriage was cut short by his death and his long-term estate plan may have been thwarted by undue influence right before his passing.

While a long-term marriage is no guarantee for an amicable estate settlement, they’re more likely to have produced estate plans that balance the welfare of a father’s children with those of his later spouse.

Evidence of wrongdoing may be nuanced. Questions as to the existence or nonexistence of estate planning documents are avoided and personal property disappears or is transferred to the wrong recipients. Family heirlooms might be found in the garbage at the decedent’s house, perhaps as early as the date of death. The family home is locked up, the locks are changed, and no one except the controlling party is allowed access.

Cases that are not resolved with cooler heads will frequently escalate to probate, estate, trust, and property disputes that exemplify the stereotypes surrounding classic battles between stepmothers and their stepchildren.

Reference: Forbes (January 23, 2018) “Stepmothers: The Cause Of So Many Estate Fights”

Inherited IRA Basics

“Inherited IRAs and 401(k)s can be a great vehicle for passing assets from these accounts to non-spousal beneficiaries.”

Inherited individual retirement accounts have been a common way to let non-spousal beneficiaries inherit an IRA account and allow the account to continue to grow on a tax-deferred basis in the future. These rules were changed in 2007 to allow non-spousal beneficiaries of 401(k) and similar defined contribution retirement plans to treat these accounts the same way.

Investopedia’s article, “Inherited IRA and 401(k) Rules Explained,” says spousal beneficiaries of an IRA have the option of taking the account and managing it, as if it was their own. This includes the calculation of required minimum distributions (RMDs). For non-spousal beneficiaries, an inherited IRA account can give them a few options, including the ability to stretch the IRA over time by letting it continue to grow tax-deferred.

IRA account holders who want to leave their accounts to non-spousal beneficiaries should enlist the help of an estate planning attorney who understands the complex rules surrounding these accounts. The account beneficiaries must be careful to ensure they don’t inadvertently trigger a taxable event.

The beneficiaries of an inherited IRA can open an inherited IRA account, taking a distribution (which will be taxable), or disclaiming all or part of the inheritance (causing the funds to pass to other eligible beneficiaries). Traditional IRAs, Roth IRAs, and SEP IRAs can be left to non-spousal beneficiaries in this way. A 2015 rule change says the creditor protection previously afforded an inherited IRA was ruled void by the U.S. Supreme Court. Inherited IRA accounts can’t be commingled with your other IRA accounts, but the beneficiary can name their own beneficiaries upon their death.

The rules for RMDs for inherited IRAs or inherited 401(k)s are based on the age of the original account holder at the time of his or her death. If the account holder wasn’t yet 70½—the age at which RMDs must start—the beneficiary can wait until they reach age 70½ to begin taking RMDs. The required percentages will be based on the IRS table in effect for their age at the time.

If the original account holder had reached age 70½ and was taking RMDs, then the beneficiary must continue taking a distribution each year.  However, the RMDs will be based on their age, not the age of the original account holder. As a result, the distribution amounts will be less than those of the original account holders (assuming the beneficiary is younger). This lets him or her to stretch out the account via tax-deferred growth over time.

These rules are complicated, so work with a Thousand Oaks estate planning attorney at Family Security Law Group, APC to be certain they’re followed to avoid costly errors.

Reference: Investopedia (December 18, 2017) “Inherited IRA and 401(k) Rules Explained”

What Assets are Considered When Determining Medicaid Eligibility?

“Understanding how different assets are considered for Medicaid eligibility.”

Medicaid is a needs-based government program administered by the states, with income and asset limitations that apply before you can qualify for the program’s assistance, says nj.com in the recent article, “How trusts fit in with Medicaid planning.”

To prevent individuals from just making quick transfers of their property, either outright or in a trust, to qualify for the Medicaid program, there’s a penalty period imposed on transfers made within five years of applying for Medicaid.

The penalty is a period of time, during which the applicant doesn’t get Medicaid benefits after otherwise qualifying because of the amount transferred within the prior five-year period. The penalty period is determined by dividing the amount transferred by the monthly penalty divisor.

In the same vein, if a person creates a trust using some of his or her own funds, where the individual is the sole beneficiary or one beneficiary in a group of beneficiaries, the trust may be considered an available resource for purposes of determining eligibility for Medicaid. It will be counted as an asset when determining eligibility for the program.

This is especially true, if the trust can be revoked. A revocable trust and its assets can be “pulled back” into the name of the Medicaid applicant, and be counted as his or her asset for eligibility purposes.

If the trust is created by a third party and with third party funds for the benefit of the Medicaid applicant, the answer would depend on the specific terms of the trust and whether the settlor (the person who created the trust) is the spouse of the Medicaid applicant.

This is because income and asset limitations are imposed on the “community spouse” (the spouse still living at home), in order for the applicant spouse to qualify for Medicaid.

The state government may also have the right of recovery against the estate of a deceased Medicaid recipient for Medicaid benefits paid to that person during his or her lifetime. This means if the deceased Medicaid recipient's estate has a claim to assets, either outright or in a trust, the state may be able to recover some of those assets.

Reference: nj.com (December 26, 2017) “How trusts fit in with Medicaid planning”

Now That the Tax Bill is Signed, What Happens for Me?

“…President Donald Trump signed into law the sprawling tax bill that was hastily built out by Republican leaders over the past month. In doing so, he formalized a huge range of changes to how Americans — and American businesses — will pay their taxes.”

In light of the fact that our tax laws weren’t exactly user-friendly even before the Republican reforms, The Chicago Tribune explains how the new law will affect Americans over the course of the year and beyond in its article, “What happens next with the Republican tax plan, month by month.”

There are a couple of things to keep in mind. One is that the details won’t be ironed out until the IRS releases new regulations based on the changes that Congress made. These are expected to come out throughout the coming year. Second, as with any tax discussion, you should speak with your tax advisor about your particular situation.

Let’s look at what happens when, as we know it now:

January 2018: The new tax law goes into effect.

Speak with tax advisers early in the year to plan for how the new law will impact you. One change starting in January is an expansion of the 529 College Savings Plans. These used to be reserved for saving money for college, but the new law expands their use to also include paying for K-12 education.

If you're looking to buy or refinance a house, the mortgage interest deduction will be capped at $750,000 as of the first of the year—not $1 million. If you purchase a new house or refinance, there will be some different considerations.

The estate tax threshold goes up.

Businesses will start seeing lower tax rates as part of the Republican plan “trickle down” theory of economics. Some stockholders will also likely see benefits, as companies buy back stock.

February 2018: The IRS will publish new tax rates. The tax code changes will also impact your paycheck, so your W-4s may require tweaking. In January, the amount that's withheld will likely be too high, since most people are getting a tax cut. However, we won't know until February when the IRS releases the new rates about how much you're overpaying. (You'll get those overpayments back after you file in 2019.) Once the IRS publishes the new rates, you'll have fewer dollars taken out of your paycheck in taxes.

April 2018: File your taxes. There aren’t too many changes here, because you're paying on your 2017 earnings.

Before the end of 2018: Consider how to prepay alimony before the end of 2018. Your ability to deduct that payment will end, beginning in 2019. You may want to ask the judge if you can pay more in 2018 to claim the deduction on that year's taxes.

January 2019: The Obamacare individual mandate ends. The requirement that you either have insurance coverage or pay a fine is eliminated, so you can just not have medical insurance and not have to pay extra on your taxes.

April 2019: File your taxes. You'll get more money back after filing your taxes, because of your overpayment in January and February of 2018.

The alternative minimum tax (AMT) also goes up at this time.

2026: Individual tax cuts expire, unless they’re renewed by Congress.

Reference: Chicago Tribune (December 23, 2017) “What happens next with the Republican tax plan, month by month”

Financial and Estate Planning with Special Needs Family Members

“Since most federal and state benefits are "needs based," the government is always looking over the shoulder of special needs persons.”

About 58 million people nationwide over the age of five identify themselves as disabled. That’s the largest single minority in the country. Millions of Americans want to help them.

However, as CBS News says in its recent article, “’Special needs’ people need special financial planning,” giving money directly to a special needs child or adult—especially if they're already receiving government benefits—can create problems.

If a person with special needs has more than $2,000 in their own name, he or she risks the loss of the government benefits that he or she already receives. It’s a major headache to get them back.  Instead of giving a lump sum of cash to a special needs person, the money should be structured in a way that doesn't violate government benefit requirements.

This is important because children with disabilities, like Down syndrome, now have a much longer life expectancy. As a result, the dependent person will probably outlive the parents.  However, they will still require care throughout their life. Many special needs adults live independently or in homes with little assistance. However, this doesn't mean that their government program benefits can cover their everyday needs. Therefore, it’s crucial to plan ahead.

There are several ways to have your money benefit people with special needs throughout their lives, without the loss of their federal benefits. One way is to create a special needs trust. This is a trust with the explicit purpose to "supplement, not supplant" federal and state assistance programs and to create a better quality of life for this person. A special needs trust can provide for special medical equipment, eyeglasses and vacations.

Work with an experienced estate planning attorney to create a special needs trust, because there are  many rules and regulations involved. For example, the beneficiary (the individual with special needs) can't own the trust—there must be a designated trustee or "third-party provider" who dispenses the money.

Another important part of an estate plan for the future of a dependent with special needs, is a "letter of intent." These are instructions that state what the guardian wants to happen in the future. It sets out everything a person with special needs requires, their history and what you and the person want in the future.

Another alternative is an ABLE (Achieving Better Life Experience) account. This allows contributions to a maximum of $15,000 annually, provided the person is diagnosed as disabled prior to age 26. There is a maximum of $100,000 that can be in this account, before the disabled person loses his or her government benefits. An ABLE account can be used for expenses like education, employment training, health, legal fees, and funeral expenses.

Avoid these common mistakes that parents and caregivers make when planning:

• Disinheriting the child with special needs. Government benefits help provide food, shelter, and medical care, but remember it’s no more than bare bones necessities.
• Placing assets in your child's name. To qualify for government benefits like SSI or Medicaid, a person can’t have more than $2,000 in assets. If you leave funds or convertible assets directly to your child with special needs, they’ll need to be "spent down" to qualify for benefits.
• Relying on your other children to take care of their special needs sibling. This is a lot to ask of a brother or a sister, and it can cause resentment.
• Leaving money to your other children to support their sibling with special needs. This isn’t a good idea because the funds could be lost if the caregiving sibling dies, gets divorced or is sued, goes bankrupt, or just spends the funds. There's also no accountability.
• A 529 College Savings Plan or savings bond in your dependent's name. Like other assets, if these are more than $2,000, your child with special needs could be ineligible for government benefits.

Reference: CBS News (December 25, 2017) “’Special needs’ people need special financial planning”

The Fight Over the Body of Charles Manson

“The fight over Charles Manson’s body and property became more complicated, after a hearing in a downtown Los Angeles courtroom Monday.”

Los Angeles-area Probate Judge David J. Cowan told Charles Manson’s longtime pen pal and an attorney for Manson’s grandson, that a decision on the killer’s body and property was weeks away.

The judge explained that dispensing with his property and his remains were two different legal decisions, reports The Los Angeles Times in the article “Bizarre legal battle over Charles Manson's body and estate begins in L.A. court.”

Both the pen pal and Manson’s grandson are required to file paperwork on why they should receive Manson’s body and where (which county) they believe that decision should be made. Attorneys for Kern County — where Manson died in November—are eager to hear the court’s decision, because they’re the ones keeping Manson’s body on ice.

The judge’s order creates another delay in the conclusion of the Manson saga. The attorney for Manson’s grandson, Jason Freeman, has only a few days to file a claim for Manson’s remains, as well as to provide arguments on the proper court venue. Michael Channels—Manson’s pen pal for 30 years who claims to have a last will and testament from the killer—must also respond to the judge.

Kern County questioned this because Manson lived in Los Angeles County before he was arrested and in Kings County when he was in prison. State law says those decisions are made in the county where the decedent “domiciled,” or lived. County officials aren’t sure if that means before he was in prison or after.

Channels claims Manson sent him a last will and testament awarding him everything about 15 years ago. Channels operates a website hosting the killer’s photos, writings and stories.

Manson was the orchestrator of the gory killing spree in Los Angeles in 1969. Among the dead was pregnant actress Sharon Tate, wife of movie director Roman Polanski. The sensational killings terrified and fascinated the country.

Manson’s grandson said that if he received the remains, he would cremate them and spread them secretly to prevent the location from becoming a morbid tourist destination. Channels said he would do likewise and had no plans for the killer’s remaining property.

In addition to this part of the case, a Santa Monica man says he has another final will and testament from Manson. His colleague claims to be Manson’s biological son. However, neither have filed court documents for their claims.

Reference: Los Angeles Times (January 8, 2018) “Bizarre legal battle over Charles Manson's body and estate begins in L.A. court”

Simple Estate Planning Needed for All

“No matter your age or socioeconomic status, estate planning is something you need to consider.”

Estate planning isn’t just about leaving assets to heirs. A recent twincities.com article, titled “Your Money: Medical power of attorney: the missing piece of too many estate plans,” asks the reader to consider what would happen, if they were in an accident or suddenly became extremely sick.

This means determining the person who will look out for your best interests, if you are unable to speak. In short, it involves naming someone you trust as your medical power of attorney.

A living will, or advanced care directive, are important documents in your estate plan.  However, you also need a medical power of attorney to help ensure that you are getting the kind of care you would want. A medical power of attorney, sometimes known as a health care power of attorney, designates the individual(s) you would want to make health care decisions in your stead, if you’re unable to communicate. This is your health care agent or representative.

Unlike an advanced care directive or living will, your health care agent can make decisions for you when your incapacitation isn’t life threatening.

If you don’t have a valid power of attorney designating your official health care agent, your family may be faced with having a court appoint a conservator for you.  This is a long and expensive process that should be avoided.

Appointing a medical power of attorney is the only way to be certain the person you feel most comfortable with, is in charge in case of an emergency.

When you choose your representative, make sure he or she is willing to take on that responsibility. You should also name an alternate representative, if your primary person is unavailable. Be certain that he or she is comfortable in abiding by your wishes and relaying that information to your doctor.

A estate planning attorney at Family Security Law Group, APC is ready to assist you to complete the correct forms and have them notarized and/or witnessed.

Reference: twincities.com (December 16, 2017) “Your Money: Medical power of attorney: the missing piece of too many estate plans”

Can You Retire in 2018?

“The decision to retire, isn't one to be taken lightly.”

If you're thinking that 2018 will be the year you bring your career to a close, be sure to consider these key items first, says The Motley Fool in the recent article, “Should You Retire in 2018?”

How are my savings? While there’s no magic number, the general rule says you should try to have 10 times your ending salary saved before you retire. Most retirees need around 80% of their former income to live comfortably. One savings tactic is to contribute to a 401(k). If you stay on the job a few years longer and max out during that time, you'll have extra cash in retirement and avoid tapping your nest egg sooner.

Full Retirement Age for Social Security? If you're planning to fall back on Social Security benefits in retirement, you'll need to think about whether retiring in 2018 will hurt you from a Social Security standpoint.

If you wait until your full retirement age to take benefits, you'll collect the exact amount you're entitled to, based on your work history without a reduction or boost.  However, if you file for benefits early, you'll lower your payments by a certain percentage for each year you collect them before full retirement age.

If you delay taking Social Security past full retirement age, you'll accrue delayed retirement credits that give your benefits an annual 8% boost.

If you're thinking of retiring this year, calculate how your age might affect your Social Security payments, and make a smart decision based on that calculation.

Plans in place? While retirement is often thought of as a time to relax, travel and enjoy life, many seniors find themselves bored, restless and even depressed. Before you decide to retire this year, consider how you'll actually spend your time once you no longer have a job.

Retirement can be a fulfilling period of life, if you’re emotionally and financially prepared. But if that isn't the case, you should keep working until you have things mapped out, especially if you like your job and are able to keep doing it for a while.

Reference: The Motley Fool (January 7, 2018) “Should You Retire in 2018?”

Are Your Estate Planning Documents Up-to-Date?

“Update your documents, such as wills and life insurance policies, to reflect births, divorce and other developments.”

There are very few things as important as estate planning. If you don’t handle your business while you’re still alive, the consequences can be drastic for your heirs and loved ones.

According to a recent Newsday article, “Make sure your estate plan keeps up with life changes, experts say,” estate planning may seem overwhelming and depressing, because it deals with issues of aging.  Some people believe that estate planning is just for the very rich.

That’s not right. Estate planning is for everybody. Make a plan to do it now, in order to avoid consequential fumbles.

Let’s look at what you need to do.

Estate planning is a set of legal documents that state who will receive your assets and property when you pass away.  It also specifies who you want to make medical decisions, and who should make financial decisions, if you are unable to do so yourself.

This should make everything easier for your heirs at this stressful time, when they most need it.

Remember that estate planning isn’t a one-and-done proposition. It’s wonderful that you finally got your will finished and signed, and you have your medical directives in place along with a designated individual to have your authority via power of attorney.

However, that’s not the end of it. Your estate planning documents must keep pace with change.

It’s critical that you update the contingent (secondary) beneficiaries on life insurance policies after the first spouse dies.

The birth or adoption of a child and divorce are similarly important life events that will require you to review and update your estate planning documents.

Don’t assume that establishing joint tenancy (sharing ownership in personal property, like your family home) or joint ownership over financial accounts is enough to protect your assets.

Finally, work with an experienced estate planning attorney.  Contact one of our Thousand Oaks estate planning attorneys at Family Security Law Group, APC for a complimentary consultation to make sure you are up-to-date.

Reference: Newsday (March 4, 2018) “Make sure your estate plan keeps up with life changes, experts say”