Family Security Law Group, APC

Am I Too Young to Start Thinking About Estate Planning?

“After taking inventory of your possessions, including your home, vehicle, stocks, life insurance policies, etc., there are many steps you will need to take to protect these assets -- and yourself. There are many steps and documents that advisors will suggest you put into place immediately for your protection.”

Many people believe they’re too young to begin thinking about estate planning. Others say they don’t have significant enough assets to make the process of planning worthwhile.

However, the truth is that everyone needs estate planning. If you have any assets, and you intend to give those assets to a loved one, you need to have a plan.

Forbes’s article, “Reviewing Your Financial And Estate Planning Checklist,” examines some important topics in estate planning.

The first of topic is a durable power of attorney for property, finances and health care. This document allows you to designate a trusted individual to make decisions and take action on your behalf with matters relating to each of the three areas above.

In addition to the importance of having all powers of attorney readily available, in case you become incapable of making decisions, beneficiary designations should also be looked at frequently to update any changes to family situations, like a birth or adoption, death, marriage or divorce.

Another topic to address is a living trust. A trust will give direction regarding where and how the assets are dispersed when you die. A great reason to use a living trust is that the assets in a trust do not pass through probate court, which can be an expensive and time-consuming process.

Another area is digital assets. It’s critical for your heirs to have access to digital files, passwords and documents. This can be easy to overlook. Create a list of your digital assets, including social media accounts, online banking accounts and home utilities you manage online. Include all email and communications accounts, shopping accounts, photo and video sharing accounts, video gaming accounts, online storage accounts, and websites and blogs that you manage. This list should be clear and updated for your heirs to access.

If you fail to plan for these matters, the outcome will be stressful and expensive for your family. 

Reference: Forbes (January 4, 2019) “Reviewing Your Financial And Estate Planning Checklist”

What Should I Be Doing 10 Years Before Retirement?

“Here are five things you should be doing for success, as you enter the retirement red zone.”

Investopedia’s recent article, “5 Things to Do 10 Years from Retirement,” explains that there's a red zone both in football and retirement planning. In many instances, that zone is where the game is won or lost. In football, the red zone is 20 yards from the goal line. For retirement, it's 10 years from your target retirement date. As you move towards your goal, you may need to “huddle up” and look at your game plan.

1. Figure Out What Retirement Means to You. Before you start making financial plans, be clear on what retirement means to you. It may mean working 40 hours instead of 60 or never working another day for the rest of your life. Whatever you like, it's important to have some idea of what you want to do every day. From there, you can start to shape a financial plan to support your retirement vision.
2. Determine How Much Money You’ll Spend Every Month. Once you've defined what your retirement will look like, you can begin planning for it financially. First, determine how much you'll be spending every month on your retirement budget. Many pre-retirees just don’t know how much they need to live on a monthly basis. An accurate retirement plan will be based on your monthly household expenses.
3. Examine Your Sources of Income in Retirement. While looking at your spending, be aware of all the types of income you'll have during retirement, such as Social Security, a pension, a 401(k) or an IRA. There are choices that will have to be made, if you have a pension. The timing for collecting Social Security payments is also important.
4. Rework Your Investment Strategy. The way you’ve been investing for the past 30 years, is not how you should invest for the next 30. Younger people focus on accumulation, but when you’re in or nearing retirement, you need to concentrate on income and keeping pace with inflation. Diversification is important, but what's more powerful than diversification is asset allocation.
5. Consider Hiring a Financial Professional. You can do-it-yourself, since there are many inexpensive funds and research information available. However, there's much more that goes into creating a comprehensive retirement plan than just investments. Your retirement plan should address your need for income, estate planning, survivorship planning, insurance needs, business continuation, inflation, and other points.

As in football, the team that wins the game, is often the team who played well in the red zone. Don’t fumble the ball at the goal line or settle for a field goal. Score a touchdown with smart retirement planning.

Reference: Investopedia (September 7, 2018) “5 Things to Do 10 Years from Retirement”

Did the Queen of Soul Leave a Will?

“Three handwritten wills have been found in one of the homes of the late Queen of Soul Aretha Franklin, all with a theme of providing for her four sons and even commentary involving others she felt were insincere or ‘grossly inefficient,’ according to the documents.”

Legendary vocalist Aretha Franklin passed away last August of pancreatic cancer. It was believed that she died intestate—without a will, even though she was survived by four adult sons.

The Detroit News’s recent article, “Handwritten wills found in Aretha Franklin home favor her four sons” reports that three handwritten wills have been discovered in one of her homes.

These documents suggest that Aretha had been considering what she wanted to leave to her heirs, if indeed the wills are found to have been written in her hand. Two of the wills discovered in a locked cabinet were dated 2010, eight years prior to her death.

Legal documents were filed by attorneys David J. Bennett and Kevin M. Check, who were hired by the personal representative of the estate, Franklin’s niece, Sabrina Garrett Owens. Bennett has been Franklin's lawyer for more than 40 years.

According to the documents, Owens discovered a key to a locked cabinet that she previously couldn’t open. She found two holographic wills inside that were dated June 21, 2010 and October 20, 2010. Owens also found a spiral notebook with another purported holographic will dated March 31, 2014, under the cushions of a living room couch.

The court filing says that the heirs and their counsel “have been unable to reach a resolution with each other over the admission, validity and dispositive provisions of the purported Holographic Wills.”

Unlike traditional wills, the signing of holographic wills aren’t witnessed and are probated in several states, providing they’re authenticated by other means, such as by verifying the handwriting and the intended wishes they contain. Michigan recognizes holographic wills.

Owens has asked for direction from County Probate Judge Jennifer S. Callaghan on how to continue as personal representative in the matter. A hearing is scheduled for this summer.

“She remains neutral and wishes that all parties involved make wise choices on behalf of their mother, her rich legacy, the family and the Aretha Franklin estate,” a statement said of Garrett Owens, according to the Associated Press.

The new wills certainly add confusion to the probating of Franklin’s estate. The handwritten wills are hard to read and may be a bit embarrassing. If they were personally written by Franklin, some sections contain comments about relatives, attorneys, and even a “Ha, Ha, Ha” and “BS” when describing someone. In an another aside, she said that one attorney had been “grossly inefficient.”

Each document starts with “being in sound mind and physical health” pronouncement—one noted “with the exception of high blood pressure, a mass on the pancreas, diabetes …”

A common theme of these wills is that Aretha clearly wanted to care for her sons: she wanted her automobiles and property to be supervised by one son; and all of her artwork, copyrights, and future royalties from her music to be shared equally by all her boys. She also wanted them to have her personal papers, awards and gold records.

One statement said that she wanted two of her sons to “take business administration classes and get a certificate or degree.” She specifically directed that her grandchildren are also to be gifted.

The only dollar figure listed in the paperwork is a $1.6 million bank account. However, Aretha’s total worth from her various properties, jewelry, royalties and other assets have been estimated at roughly $80 million.

The IRS says that Franklin owed more than $6.3 million in back taxes. However, Bennett says that Franklin paid all her debts, including several million dollars in federal taxes.

Reference: The Detroit News (May 20, 2019) “Handwritten wills found in Aretha Franklin home favor her four sons”

Is There a Market for My Long-Term Care Insurance Policy?

“Some people have life insurance policies that have long-term care riders that allow them to access up to the death benefit for long-term care needs. These might be able to be sold through a life settlement.”

There is a market to sell life insurance through what is known as a life settlement. However, there’s no such market for long-term care policies.

A life settlement is the sale of a life insurance policy to a third party. Usually the owner of the policy receives an amount that’s valued at more than the policy's cash surrender value, but less than its face value or death benefit.

nj.com’s recent article asks, “Can I sell my long-term care insurance policy?” The article explains that HMOs typically don’t include the costs of long-term care or skilled nursing care.

However, some people purchase life insurance policies that contain long-term care riders. This type of policy lets the owner tap into the death benefit for long-term care needs. The policy owner may be able to sell this insurance through a life settlement.

When contemplating the sale of your life insurance policy, you should be certain that you don’t need the life insurance for legacy, estate planning needs or income needs.

Remember that HMOs don’t cover any potential needs for skilled nursing care. A person who moves along the continuum of care to an assisted living facility will need the long-term care insurance.

Be sure to look over the policy details. Long-term care insurance policies, once they’re employed, usually no longer require you to pay the premium.

According to the Genworth Cost of Care annual report, the costs for assisted living facilities in New Jersey, for example, can average over $6,000 a month, while nursing homes average $10,600 per month. This is a significant ongoing expense.

Only a long-term care insurance policy is going to cover the skilled assistance a person will need when she’s not able to do daily living activities, like bathing, toileting, transferring, eating, continence and getting dressed.

Medicare will only pay for up to 100 days in a skilled facility after a hospital stay.

Reference: nj.com (May 21, 2019) “Can I sell my long-term care insurance policy?”

What States Rank the Highest for Elder Fraud in Total Losses?

“Georgia is fifth in the country for elder fraud in total losses, an online publication, Comparitech, reported this month.”

The four states that have higher losses than Georgia are California, Florida, Texas, and Arizona. Georgia’s losses in 2018 totaled $1.5 billion, according to The Augusta (GA) Chronicle’s recent article, “$1.5 billion lost to elder fraud in Georgia last year.”

The article reports that these types of cases have seen an uptick over the past several years, but Georgia hasn’t seen one type of elder fraud that occurs more often than others.

“We have it a good bit,” said Jefferson County Chief Deputy Col. Tim Moore. “We work multiple cases where people have been defrauded. It’s an ever-changing threat.”

Common scams that defraud the elderly include phone calls where the scammer says that he is a law enforcement officer, a representative of the IRS or another agency, or of a business such as a utility company.

Law enforcement provides advice for the public:

• No one should give out any personal information, such as Social Security numbers, bank account numbers, or credit card information. Don’t make payments or make any agreements over the phone.
• Officials also warn that if the caller disconnects in the middle of the conversation, don’t call back because they will charge you for the call.
• Remember that state and federal agencies won’t call and threaten citizens with a warrant over the phone.

In addition, if you get a suspicious email, don’t open its attachments and don’t click on any links that may be in the email. You should contact the agency whose name appears as the sender and verify that is who actually sent the email.

Comparitech explains that the vast majority of elder fraud cases in the U.S. go unreported, and they estimate five million cases of elder fraud occur in the country annually, resulting in $27.4 billion in losses.

Reference: Augusta (GA) Chronicle (May 20, 2019) “$1.5 billion lost to elder fraud in Georgia last year”

What Should I Keep in Mind in Estate Planning as a Single Parent?

“For single parents with a minor child, the stakes are perhaps even higher.”

Every estate planning conversation eventually comes to center upon the children, regardless of whether they’re still young or adults.

Talk to a qualified estate planning attorney and let him or her know your overall perspective about your children, and what you see as their capabilities and limitations. This information can frequently determine whether you restrict their access to funds and how long those limitations should be in place, in the event you’re no longer around.

Kiplinger’s recent article, “Estate Planning for Single Parents” explains that when one parent dies, the children typically don’t have to leave their home, school and community. However, when a single parent passes, a child may be required to move from that location to live with a relative or ex-spouse.

After looking at your children’s situation with your estate planning attorney to understand your approach to those relationships, you should then discuss your support network to see if there’s anyone who could serve in a formal capacity, if necessary. A big factor in planning decisions is the parent’s relationship with their ex. Most people think that their child’s other parent is the best person to take over full custody, in the event of incapacity or death. For others, this isn’t the case. As a result, their estate plan must be designed with great care. These parents should have a supportive network ready to advocate for the child.

Your estate planning attorney may suggest a trust with a trustee. This fund can accept funds from your estate, a retirement plan, IRA and life insurance settlement. This trust should be set up, so that any court that may be involved will have sound instructions to determine your wishes and expectations for your kids. The trust tells the court who you want to carry out your wishes and who should continue to be an advocate and influence in your child’s life.

Your will should also designate the child’s intended guardian, as well as an alternate, in case the surviving parent can’t serve for some reason. The trust should detail how funds should be spent, as well as the amount of discretion the child may be given and when, and who should be involved in the child’s life.

Your trust should state who has authorized visitation rights, including the right to keep the child for extended visits or for vacation. It should also name the persons who are permitted to advise or consent on major decisions in the child’s life, on issues about education, healthcare and activities.

A trust can be drafted in many ways, but a single parent should discuss all of their questions with an estate planning attorney.

Reference: Kiplinger (May 20, 2019) “Estate Planning for Single Parents”

What’s a Death Tax?

“Sometimes people confuse the estate tax with an income tax, but it is not a tax on income. It is a transfer tax imposed on the wealthy at death.”

The federal estate tax is sometimes called the death tax. It’s a one-time tax that is imposed at death. Forbes’ recent article, “Eight Things You Need To Know About The Death Tax Before You Die,” explains that it’s not unusual for people to mix up estate taxes with income taxes. The federal estate tax is a transfer tax imposed on individuals with estates over $11.4 million ($22.8 for couples). The tax is on anything over that amount and ranges between 18% and 40%. However, if you die with an estate less than $11.4 million in 2019, no estate tax is due.

Assets in your name only and everything else you had control over will be added into your gross estate. For example, all stocks, bonds, bank accounts and life insurance death benefits are included, as well as any real estate, business interests, jewelry, household furnishings and artwork.

Note: just because your family avoids probate with your estate, doesn’t mean they won’t have to deal with estate tax. For instance, life insurance is in your gross estate, if you owned or could control the policy. IRAs and 401(k)s are also included in your gross estate. Just because these assets aren’t included in the estate because they have a named beneficiary, it doesn’t mean they’ve avoided estate tax. It depends upon the level of control you had over the assets.

If you owned property jointly with a spouse, half of the home’s value is included in the gross estate. If you owned property jointly with someone else (not your spouse), then 100% of the value is included in the gross estate—unless you can prove that the other party contributed some or all of the value.

If you’re the beneficiary of a trust your parents created for you, those assets may be included in your gross estate, if you have certain rights over the trust assets.

If you’re married to a U.S. citizen, you get an unlimited marital deduction for all of the assets you leave to your spouse.  However, some states impose their own estate tax, which may require additional planning. For example, Massachusetts has a $1 million estate tax exemption. A tax may also be levied in a state where you own real estate.

Talk to one of our experienced estate planning attorney at Family Security Law Group, APC about your own estate tax liability, and what actions you can take to decrease any taxes that may be due.

Reference: Forbes (May 20, 2019) “Eight Things You Need To Know About The Death Tax Before You Die”

Research Funeral Costs Now to Help Your Family Later

“The days after a loved one dies are terrible for making smart financial decisions.”

It’s fairly typical for the grief and stress of losing a loved one to cloud a person’s judgment. You may not be thinking clearly, and you want to do everything you can to honor the person who’s passed away. Add to this the immediacy of planning something as expensive as a funeral.

AZ Central’s recent article, “Why this group wants you to know the cost to bury your loved one,” says that what’s even worse, only one out of six funeral homes post full price lists online. This lack of data makes it hard to compare costs, according to a new survey by the Funeral Consumers Alliance and Consumer Federation of America. Without the ability to shop online, you may spend far more than you planned or needed on a burial or cremation.

Grieving people regularly don’t even address the cost, only to be surprised when the bill comes months later.

The cost of a funeral service can vary by thousands of dollars, even in the same city. For example, in Tucson, funeral homes that fully disclosed prices on their websites charged about $3,500 for a full-service funeral, a 2017 report by FCA and CFA found—about $1,100 less expensive for the same service than at other funeral homes in the city. A simple cremation with a container cost about $765 at Tucson funeral homes whose prices were displayed online, a savings of $230 over funeral homes without transparency.

You can get a full price list by visiting a funeral home in person or requesting costs over the phone. That’s a federal law. Arizona law also requires funeral homes to provide price lists upon request by mail.

To save even more, you can research costs ahead of time and talk with family members about your funeral preferences. You can then put those decisions in writing. Planning now could save your family a significant amount of money later.

California became the first state to mandate that funeral homes post services they offer on their websites five years ago, and the Federal Trade Commission (FTC) is currently reviewing its funeral home regulations. Consumer groups are advocating to the FTC and 49 other state legislatures to take action requiring the online posting of prices. They also want the FTC and states to require prices to be prominently displayed on the funeral home's homepage.

Some less reputable funeral homes in California have skirted the law by putting the price list in small font, at the bottom of the homepage, or in a section of the website that’s hard to find.

Reference: AZ Central (February 4, 2018) “Why this group wants you to know the cost to bury your loved one”

Should a Widower Add His Kid to the House Deed to Avoid Probate?

“Medicaid utilizes a five-year lookback to determine if you gave assets away within five years of your application for benefits. Transferring the home could make you ineligible for a period of time.”

It’s not uncommon for a senior who’s a widow or widower to want to help his or her children with the estate, by re-deeding their mortgage-free home to include a child or children.  However, there’s a specific way to do this.  It is important to be aware of the effect of this action on government benefit programs, like Medicaid.

nj.com advises in its recent article, “The risks of changing your home's deed,” that to avoid the probate process, a person could change the deed to the home to add an adult child as Joint Tenant with Right of Survivorship. In that way, the home will avoid probate, when the senior passes away.

There can be some potential negative consequences.

If the home has unrealized capital gains when he passes away, only his half of the value of the home would be eligible for a step-up in basis. If a senior goes ahead and sells the home while he’s still alive, he can exclude up to $250,000 of capital gains from tax, if it was his primary residence in two of the five years directly preceding the year it was sold.

 However, if the daughter lives out of state, adding her to the deed will mean that her half won't be eligible for the exclusion because her primary residence is in another state.

In addition, if the daughter has creditors to whom she owes money, those creditors could attach a lien to her half of the senior’s home.

One other thought is whether the senior owns other assets or has long-term care insurance or other resources to pay for long-term care, should it become necessary.

If the senior in our scenario transfers half of his home to the daughter, it could be an issue if he needs long-term care and needs to qualify for Medicaid. Medicaid has a five-year lookback to determine if you gave assets away within five years of your application for benefits. Transferring the home could make the widow here ineligible for a time.

Speak to an experienced estate planning attorney at Family Security Law Group about your specific circumstances to be certain you understand all of the consequences of taking such action.  Contact us today at (805) 496-4681.

Reference: nj.com (January 29, 2018) “The risks of changing your home's deed”

The Joy of Planning Your Own Funeral

“The idea of planning a funeral is generally not at the top of anyone's "to do" list. It's a job that almost always falls to the spouse, children, or close friend of a deceased. Expressing your preferences or actually making the formal arrangements can truly be a gift to your family and friends.”

It’s not uncommon for an estate planning attorney to get a phone call from a personal representative of the estate of a recently departed, asking if the attorney has any documentation about the decedent’s wishes for a memorial service. Unless some sound planning took place, chances are there are no instructions.

Inside Indiana Business’ recent article, “The Gift of Pre-Planning a Funeral” explains that if your wishes are documented, it can help eliminate your family’s stress during a highly emotional time. A 2017 study by the National Funeral Directors Association found that while 66% of Americans believe that pre-planning is important, only 21.4% had actually completed the exercise.

Pre-planning does not have to be complicated. It can be as simple as a written statement of your desires or a legal Funeral Planning Declaration.

There are several reasons why pre-planning makes good sense. Let’s take a look at them:

Decreasing stress. Pre-planning can eliminate some of the stress on family or friends. It also can avoid emotionally charged conflicts right after your passing. Spend some time now to make your preferences known or make the actual arrangements.

Avoid spending excessively. If you pre-plan, you can select appropriately. Your family may not consider the cost as they decide right after your passing—a time when they can barely think. Some may mistakenly feel the amount spent shows the amount of respect and love they have for you. Either way, it often means overspending.

Specify detailed instructions. You can provide some peace to your family by knowing that your final wishes will be carried out. You might consider things like burial or cremation, your attire, the location, service participants, music, readings, flowers and photographs. Some feel that this level of detail is unnecessary, but if you don’t specify your wishes, someone else will make these decisions.

Reimbursement of family expenses. If you want to reimburse long-distance family members and friends for their travel, you can add that into your pre-planning documentation. Talk to your attorney about including this provision in your will.

You should also think about how you’ll pay for your funeral expenses. Perhaps you can designate funds in your savings or investment account or use life insurance proceeds. By pre-paying, you can lock-in today's funeral prices but be sure your funds are safe. Ask if the sales person is an agent of your funeral home and how and where your money will be held.

Once you decide on the details of your pre-planning, share the details with your family. Pre-planning your funeral is an act of kindness for your family and friends. It’s also a chance to express your personal desires and to potentially avoid issues that can arise after your death.

Reference: Inside Indiana Business (January 15, 2018) “The Gift of Pre-Planning a Funeral”