Leaving a Legacy Is Not Just about Money

A legacy is not necessarily about money, says a survey that was conducted by Bank of America/Merrill Lynch Ave Wave. More than 3,000 adults (2,600 of them were 50 and older) were surveyed and focus groups were asked about end-of-life planning and leaving a legacy. The article, “How to leave a legacy no matter how much money you have” from The Voice, shared a number of the participant’s responses.

A total of 94% of those surveyed said that a life well-lived, is about “having friends and family that love me.” 75% said that a life well-lived is about having a positive impact on society. A mere 10% said that a life well-lived is about accumulating a lot of wealth.

People want to be remembered for how they lived, not what they did at work or how much money they saved. Nearly 70% said they most wanted to be remembered for the memories they shared with loved ones. And only nine percent said career success was something they wanted to be remembered for.

While everyone needs to have their affairs in order, especially people over age 55, only 55% of those surveyed reported having a will. Only 18% have what are considered the three key essentials for legacy planning: a will, a health care directive and a durable power of attorney.

The will addresses how property is to be distributed, names an executor of the estate and, if there are minor children, names who should be their guardian. The health care directive gives specific directions as to end-of-life preferences and designates someone to make health care decisions for you, if you can’t. A power of attorney designates someone to make financial decisions on your behalf when you can’t do so, because of illness or incapacity.

An estate plan is often only considered when a trigger event occurs, like a loved one dying without an estate plan. That is a wake-up call for the family, once they see how difficult it is when there is no estate plan.

Parents age 55 and older had interesting views on leaving inheritances and who should receive their estate. Only about a third of boomers surveyed and 44% of Gen Xers said that it’s a parent’s duty to leave some kind of inheritance to their children. A higher percentage of millennials surveyed—55%–said that this was a duty of parents to their children.

The biggest surprise of the survey: 65% of people 55 and older reported that they would prefer to give away some of their money, while they are still alive. A mere 8% wanted to give away all their assets, before they died. Only 27% wanted to give away all their money after they died.

Reference: The Voice (June 16, 2019) “How to leave a legacy no matter how much money you have”

Suggested Key Terms: Estate Plan, Inheritance, Legacy, Will, Health Care Directive, Power of Attorney

Government Programs That Can Pay for Some Caregiver Services

If you have a loved one who needs caregiver services, you might be looking for ways to help the person pay for the care. Your state might offer assistance with more services, or might not cover some of the items in this article, but here is a general overview of government programs that can pay for some caregiver services.

Short-Term Caregiver Services and Medicare

If your loved one is eligible for Medicare, he might get a limited amount of short- term care through Medicare. The requirements for these services include:

  • He is recuperating from an injury or illness.
  • His doctor expects him to return to his previous level of health.
  • He meets the Medicare eligibility criteria.
  • His doctor created a plan of care for him.
  • The services are reasonable and necessary to treat his illness or injury.
  • He only needs the services on a temporary basis.

If your loved one does not need medical treatment or needs services 24 hours a day, Medicare will not provide an aide. Medicare does not give assistance for personal services only. Help with preparing meals, dressing, bathing and similar items are personal care and not covered under Medicare in the absence of necessary medical treatment.

Long-Term Care to Stay Out of the Nursing Home

The government realized it can be far less expensive to provide services that allow a person to continue living at home, rather than pay for residence in a nursing home. When a person lives at home, she pays for her housing, utilities, insurance, food and other expenses.

One such plan is the Program of All-Inclusive Care for the Elderly (PACE). If your loved one is a Medicare or Medicaid enrollee, he can get nursing-home level care in his own home. The recipient does not have to pay a deductible or copayment for the services, medical treatment, or even prescription drugs. PACE can provide skilled nursing, hospice and an in-home caregiver. It is whatever his PACE health care team decides he needs.

The PACE requirements include:

  • Enrollment in Medicaid or Medicare
  • Being 55 years or older
  • Meeting his state’s certification rules for needing nursing home-level care
  • With PACE services, he can live safely in the community.
  • He lives in an area that PACE serves. Some states do not participate in the PACE program.

If your loved one is not on Medicare or your state does not offer the PACE program, he might qualify for Home and Community-Based Services (HCBS), also called the waiver program. This program can help your loved one get a high level of care at home, so she does not have to move into a nursing home or another institutional facility.

The requirements for and services of the Medicaid waiver program vary from state to state. In general, she needs to:

  • Be enrolled in Medicaid.
  • Meet her state’s criteria for level-of-care and functional eligibility.
  • Have a plan of care from her doctor.
  • Meet the income and asset restrictions for her state.

Once she qualifies, depending on the circumstances, she can get a home health aide, skilled nursing, hospice, adult day services and personal care. Some states offer meal programs, transportation to medical care, case management and help with shopping, bill paying and other services.

References:

AARP. “Need Help Paying for Your Loved One’s Caregiver?” (accessed June 12, 2019) https://www.aarp.org/caregiving/home-care/info-2018/help-paying-for-caregiver.html?intcmp=AE-CAR-LEG-EOA2

Suggested Key Terms: how to pay for a loved one’s caregiver, resources to help pay for caregiver costs

What Do I Need to Know About Special Needs Trusts?

One of the hardest issues in planning for a child with special needs, is trying to calculate how much money it’s going to cost to provide for the child, both while the parents are alive, and after the parents die.

A recent Kiplinger’s article asks “How Much Should Go into Your Special Needs Trust?” As the article explains, a special needs trust, when properly established and managed, lets someone with a disability continue getting certain public benefits.

Even if the child isn’t getting benefits, families may still want the money protected from the child’s financial choices or those who may try to take advantage of them. A trustee can help manage the assets and make distributions to the child with special needs to supplement his lifestyle beyond what public program benefits provide.

A child with special needs can have multiple expenses, and the amount will depend on the needs and lifestyle of the family and the child’s capabilities. One of the biggest unknowns is the cost of housing. If the plan is for the child to live in a private group home-type situation, there are options. Some involve the purchase of a condo in a building with services for those with special needs. Many families also add into the budget eating out once a week, computers and phones and other items.

When the parents pass away, this budget will need to increase, because what the parents did for their child must be monetized.

Fortunately, public benefits can usually offset many of the basic costs for a child with special needs. For example, the child may be eligible for Supplemental Security Income (SSI), as well as a Section 8 housing voucher and SNAP food assistance. When the parents retire, SSI is typically replaced with Social Security Disability Insurance (SSDI), which is one-half the parent’s payment.

When the parent dies, this payment becomes three-quarters of that amount. Adult Family/Foster Care may be available. That will depend on the group housing situation.

The child may also be working and bringing in additional income (minus whatever benefits may be offset by this income).

It’s vital to do a complete analysis of the future costs to provide for a child with special needs, so parents can start saving and making adjustments in their planning right away.

The laws on this planning may vary from state to state, so be sure to contact an experienced elder law attorney.

Reference: Kiplinger (June 10, 2019) “How Much Should Go into Your Special Needs Trust?”

Suggested Key Terms: Elder Law Attorney, Special Needs Trust, Disability, Supplemental Security Income, SSI

How To Avoid Senior Financial Abuse

Medical research has demonstrated a clear link between accelerated cognitive aging to financial vulnerability, even without any kind of dementia. In other words, as described in the article “Be prepared to avoid financial exploitation” from SBJ, we may feel fine and we may be fine, but our cognitive abilities change as we age.

One of the first signs of cognitive decline is diminished financial capacity, or the progressive loss of a person’s ability to manage banking and investment decisions. If you have an aging parent, you may have seen them struggle with tasks that were previously easy for them to do, like balancing a checkbook or tracking investments.

It’s estimated that for every 44 cases of senior financial abuse, only one is reported to authorities.  In a 2010 study by a nonprofit, one in five adults 65 and older have been a victim of financial fraud or manipulation.

There are several actions that can be taken to mitigate the risk of financial fraud and exploitation. However, the first one is planning before signs of cognitive impairment are seen. Here’s how:

Financial preparation. First, designate a trusted emergency contact for all financial accounts to receive information, if the institution suspects exploitation. Have an estate planning attorney create a durable power of attorney to appoint a trusted individual to act on your behalf. “Durable” means that it will remain in effect, even if you become incapacitated.

Prepare a will to dispose of assets after your death.

Don’t discuss your will or any financial matters with people who are new in your life. That includes caregivers, the new neighbor down the street or people who call claiming some distant connection.

Monitor your credit report and stay up to date with the latest in scams. Seniors are now being targeted by thieves presenting themselves as calling from the Social Security Administration and threatening to cut off benefits. The SSA does not call to threaten individuals, and it never asks for payment in gift cards.

Plan how to transition your financial accounts. That may mean having a professional manage your finances, but make sure they are a licensed fiduciary, so that your interests must come first. Your estate planning attorney may know of these services.

Not all financial institutions have addressed the issue of safeguarding customers from financial fraud and exploitation. Find out what your bank, financial advisor and investment companies are doing. Do they monitor accounts for unusual transactions? What tools are available to account holders to detect suspicious activity?

Speak with your estate planning attorney about making sure all  your legal documents are properly prepared for any cognitive decline, to protect yourself and your family.

Reference: SBJ (June 10, 2019) “Be prepared to avoid financial exploitation”

Suggested Key Terms: Elder Financial Abuse, Durable Power of Attorney, Will, Estate Planning Attorney, Scammers, Social Security, Cognitive Decline

Business Owners Need Estate Plan and a Succession Plan

Business owners get so caught up in working in their business, that they don’t take the time to consider their future—and that of the business—when sometime in the future they’ll want to retire. Many business owners insist they’ll never retire, but that time does eventually come. The question The Gardner News article asks of business owners is this: “Do you have a business succession strategy?”

It takes a very long time to create a succession plan that works. Therefore, planning for such a plan should begin long before retirement is on the horizon. That’s because there are as many different ways to map out a succession plan, as there are types of business. A business owner could sell the business to a family member, an outsider, a key employee or to all the employees. The plan could be implemented while the business owner is still alive and well and working, or it could be set up to take effect, only after the owner passes.

The decision of how to handle a succession plan needs to be made with a number of issues in mind: family dynamics and interest in the business (or lack of interest), the nature of the business, the success of the business and the owner’s overall financial situation.

Here are a few of the more popular strategies:

Selling the business outright. There are business owners who don’t need the money and feel that no one else will care as much as they do about their business. Therefore, they sell it. There needs to be a lot of planning to minimize tax liability, when this is the choice.

Using a buy-sell arrangement to transfer the business. This can be structured in whatever way works best for both parties. It allows a slower transition to new ownership. Some families use the proceeds of a life insurance policy to fund the buy-sell agreement, so family owners could use the death benefit to buy the owner’s stake.

Buying a private annuity. This permits the owner to transfer the business to family members, or someone else, who then makes payments to the owner for the rest of their life, or maybe their life and another person, like a surviving spouse. It has the potential to provide a lifetime stream of income and removes assets from the owner’s estate, without triggering gift or estate taxes.

The plan for succession needs to align with the business owner’s estate plan. This is something that many estate planning attorneys who work with business owners have experience with. They can help facilitate the succession planning process. Talk with your estate planning attorney when you have your regular meeting to review your estate plan about what the future holds for your business.

Reference: The Gardener News (June 4, 2019) “Do you have a business succession strategy?”

Suggested Key Terms: Business Owner, Succession Plan, Estate Plan, Retirement, Private Annuity, Buy-Sell Agreement, Life Insurance Policy

Think of Estate Planning as Stewardship for the Future

Despite our love of planning, the one thing we often do not plan for, is the one thing that we can be certain of. Our own passing is not something pleasant, but it is definite. Estate planning is seen as an unpleasant or even dreaded task, says The Message in the article “Estate planning is stewardship.” However, think of estate planning as a message to the future and stewardship of your life’s work.

Some people think that if they make plans for their estate, their lives will end. They acknowledge that this doesn’t make sense, but still they feel that way. Others take a more cavalier approach and say that “someone else will have to deal with that mess when I’m gone.”

However, we should plan for the future, if only to ensure that our children and grandchildren, if we have them, or friends and loved ones, have an easier time of it when we pass away.

A thought-out estate plan is a gift to those we love.

Start by considering the people who are most important to you. This should include anyone in your care during your lifetime, and for whom you wish to provide care after your death. That may be your children, spouse, grandchildren, parents, nieces and nephews, as well as those you wish to take care of with either a monetary gift or a personal item that has meaning for you.

This is also the time to consider whether you’d like to leave some of your assets to a house of worship or other charity that has meaning to you. It might be an animal shelter, community center, or any place that you have a connection to. Charitable giving can also be a part of your legacy.

Your assets need to be listed in a careful inventory. It is important to include bank and investment accounts, your home, a second home or any rental property, cars, boats, jewelry, firearms and anything of significance. You may want to speak with your heirs to learn whether there are any of your personal possessions that have great meaning to them and figure out to whom you want to leave these items. Some of these items have more sentimental than market value, but they are equally important to address in an estate plan.

There are other assets to address: life insurance policies, annuities, IRAs and other retirement plans, along with pension accounts. Note that these assets likely have a beneficiary designation and they are not distributed by your will. Whoever the beneficiary is listed on these documents will receive these assets upon your death, regardless of what your will says.

If you have not reviewed these beneficiary designations in more than three years, it would be wise to review them. The IRA that you opened at your first job some thirty years ago may have designated someone you may not even know now! Once you pass, there will be no way to change any of these beneficiaries.

Work with an experienced estate planning attorney to create your last will and testament. For most people, a simple will can be used to transfer assets to heirs.

Many people express concern about the cost of estate planning. Remember that there are important and long-lasting decisions included in your estate plan, so it is worth the time, energy and money to make sure these plans are created properly.

Compare the cost of an estate plan to the cost of buying tires for a car. Tires are a cost of owning a car, but it’s better to get a good set of tires and pay the price up front, than it is to buy an inexpensive set and find out they don’t hold the road in a bad situation. It’s a good analogy for estate planning.

Reference: The Message (June 14, 2019) “Estate planning is stewardship.”

Suggested Key Terms: Estate Plan, Last Will and Testament, Heirs, Beneficiaries, Estate Planning Attorney

What’s Not Covered by Medicare?

Medicare Part A and Part B—also called “Original Medicare” or “Traditional Medicare”—cover a large percentage of medical expenses when you turn 65. Part A is hospital insurance that helps pay for inpatient hospital stays, stays in skilled nursing facilities, surgery, hospice care and specific home health care. Part B is medical insurance that helps to pay for doctor visits, outpatient care, some preventive services and some medical equipment and supplies. You can begin signing up for Medicare three months before the month you reach age 65.

Kiplinger’s article, “7 Things Medicare Doesn’t Cover,” takes a closer look at what isn’t covered by Medicare, plus some information about supplemental insurance policies and strategies that can help cover the additional costs, so you don’t end up with unanticipated medical bills in retirement.

Prescription Drugs. Medicare doesn’t give you any coverage for outpatient prescription drugs. However, to address this, you purchase a separate Part D prescription-drug policy that does. There are also Medicare Advantage plans that cover both medical and drug costs. Some retiree health-care policies also cover prescription drugs. You can re-enroll in Part D or Medicare Advantage coverage, when you enroll in Medicare or when you lose your other drug coverage.

Long-Term Care. Medicare gives you coverage for some skilled nursing services. However, it doesn’t include custodial care, like assistance with bathing, dressing and other daily activities. To address this, you can buy long-term-care insurance or a combination long-term-care and life insurance policy.

Deductibles and Co-Pays. Medicare Part A covers hospital stays, and Part B covers doctors’ services and outpatient care. However, you must pay the deductibles and co-payments. It is important to understand that over your lifetime, Medicare will only help pay for a total of 60 days beyond the 90-day limit, known as “lifetime reserve days.” After that, you’ll pay the full hospital cost.

Most Dental Care. Medicare doesn’t cover your routine dental visits, teeth cleanings, fillings, dentures or most tooth extractions. Some Medicare Advantage plans cover basic cleanings and x-rays, but they generally have an annual coverage cap of around $1,500. Another option is to buy a separate dental insurance policy or a dental discount plan. You can also build up money in a health savings account before enrolling in Medicare. You can use the money tax-free for medical, dental and other out-of-pocket costs at any age.

Routine Vision Care. Medicare generally doesn’t provide insurance coverage for routine eye exams or glasses. However, some Medicare Advantage plans have vision coverage. You may also be able to buy a separate supplemental policy that gives vision care alone or includes both dental and vision care.

Hearing Aids. Medicare doesn’t cover routine hearing exams or hearing aids, but some Medicare Advantage plans do cover hearing aids and fitting exams. There are also some discount programs that provide lower-cost hearing aids.

Medical Care Overseas. Medicare also doesn’t cover the medical care you get when you’re traveling outside of the U.S., except for very limited circumstances (e.g., on a cruise ship within six hours of a U.S. port). However, a Medigap plan C through G, M and N cover 80% of the cost of emergency care abroad, with a lifetime limit of $50,000. Some Medicare Advantage plans also will cover emergency care abroad.

Another option is to purchase a travel insurance policy that covers some medical expenses, while you’re outside of the U.S. This insurance may even cover emergency medical evacuation, which can otherwise cost tens of thousands of dollars to transport you aboard a medical plane or helicopter.

Reference: Kiplinger (May 23, 2019) “7 Things Medicare Doesn’t Cover”

Suggested Key Terms: Elder Law Attorney, Medicare, Medicaid, Nursing Home, Long-Term Care Planning, Retirement Planning, Elder Care

What Do I Need to Know About Trusts?

A trust is a fiduciary arrangement that lets a third party (the “trustee”) hold assets on the behalf of a beneficiary. Trusts can be drafted in a variety of ways and can specify exactly how and when the assets pass to the beneficiaries.

Because trusts usually avoid probate, the beneficiaries can get access to these assets more quickly than they might if the assets were transferred using a will. If it’s an irrevocable trust, it may not be considered part of the taxable estate, which means there will be fewer taxes due at your death.

FedWeek’s recent article, “The Basics of Trusts,” explains some of the benefits of having a trust in your estate plan. Trusts can offer the following:

  • Protection for possible incompetency. You can form a trust and transfer your assets into it. You can be the trustee, and you’ll have control of the trust assets and keep the income. A successor trustee will assume control, if you’re incapacitated.
  • Avoiding probate. The assets held in trust avoid probate, which can be expensive and time-consuming. In the trust documents, you can direct the trust and provide how the trust assets will be distributed at your death.
  • Protection for heirs. After death, a trustee can keep trust assets from being spent all at once or lost in a divorce, with specific instructions in the trust document.

A trust can be revocable or irrevocable. A revocable trust has to be created during your lifetime. If you change your mind, you can cancel the trust and reclaim the assets. With a revocable trust you can enjoy incapacity protection and probate avoidance—but not tax reduction. In contrast, an irrevocable trust can be created while you’re alive or at your death (a revocable trust becomes irrevocable at your death).

Assets transferred to an irrevocable trust during your lifetime may be shielded from creditors and divorce settlements. The same is true for the assets put into an irrevocable trust at your death.

Your heirs can be the beneficiaries of an irrevocable trust. The trustee you’ve designated will be tasked with distributing funds to the beneficiaries. The trustee will be responsible for protecting trust assets.

Contact an experienced trust attorney with your questions about possibly creating a trust for your situation.

Reference: FedWeek (May 9, 2019) “The Basics of Trusts”

Suggested Key Terms: Estate Planning Lawyer, Trustee, Revocable Living Trust, Irrevocable Trust, Asset Protection, Probate Court, Inheritance, Estate Tax

What Should I Look for in a Trustee?

Selecting a trustee to manage your estate after you pass away is an important decision. Depending on the type of trust you’re creating, the trustee will be in charge of overseeing your assets and the assets of your family. It’s common for people to choose either a friend or family member, a professional trustee or a trust company or corporate trustee for this critical role.

Forbes’s recent article, “How To Choose A Trustee,” helps you identify what you should look for in a trustee.

If you go with a family member or friend, she should be financially savvy and good with money. You want someone who is knows something about investing, and preferably someone who has assets of their own that they are investing with an investment advisor.

A good thing about selecting a friend or family member as trustee, is that they’re going to be most familiar with you and your family. They will also understand your family’s dynamics.  Family members also usually don’t charge a trustee fee (although they are entitled to do so).

However, your family may be better off with a professional trustee or trust company that has expertise with trust administration. This may eliminate some potentially hard feelings in the family. Another negative is that your family member may be too close to the family and may get caught up in the drama.They may also have a power trip and like having total control of your beneficiary’s finances.

The advantage of an attorney serving as a trustee, is that they have familiarity with your family, if you’ve worked together for some time. There will, however, be a charge for their time spent serving as trustee.

Trust companies will have more structure and oversight to the trust administration, including a trust department that oversees the administration. This will be more expensive, but it may be money well spent. A trust company can make the tough decisions and tell beneficiaries “no” when needed. It’s common to use a trust company, when the beneficiaries don’t get along, when there is a problem beneficiary or when it’s a large sum of money. A drawback is that a trust company may be difficult to remove or become inflexible. They also may be stingy about distributions, if it will reduce the assets under management that they’re investing. You can solve this by giving a neutral third party, like a trusted family member, the ability to remove and replace the trustee.

Talk to your estate planning attorney and go through your concerns to find a solution that works for you and your family.

Reference: Forbes (May 31, 2019) “How To Choose A Trustee”

Suggested Key Terms: Estate Planning Lawyer, Trusts, Trustee, Asset Protection, Inheritance, Beneficiary Designations

Thinking about Aging? Will You Need Long Term Care?

Many people will end up needing assistance to care for themselves, as they become elderly and that help may not be provided by their children. It might be wise to look into long term care costs now, according to The Detroit News in “What to know about aging and long-term care costs.”

Here’s what often happens:

  • More than a third of seniors will need to stay in a nursing home, where the median annual cost of a private room has skyrocketed to more than $100,000.
  • Four out of 10 people will opt for paid care at home. The median annual cost of a home health aide is more than $50,000.
  • More than 50% of all seniors will incur some kind of long-term care costs, and 15% of those will incur more than $250,000 in costs, according to a study by Vanguard Research and Mercer Health and Benefits.

Medicare doesn’t pay for long-term care. Medicare does not cover what it terms “custodial” care. For most Americans, who have a median of $126,000 in retirement savings, that’s an immediate financial wipeout. They will end up on Medicaid, the government health program that pays for about half of all nursing home and custodial care.

Those who live alone, are in poor health, or have chronic conditions are more likely than others to need long-term care. For women, there are special risks, since statistically women outlive husbands and may not have anyone to provide them with unpaid care.

Everyone approaching retirement needs a plan. The options are:

Long-term care insurance. The average annual premium for a 55-year-old couple was $3,050 in 2019. The older you are, the higher the cost, and if you have chronic conditions, you may not qualify.

Hybrid long-term care insurance. Life insurance or annuities with long-term care benefits now outsell traditional long-term care insurance by a rate of about four to one. This requires committing a large sum of money up front but is a way to obtain long-term care insurance.

Home equity. Selling a home to pay for nursing home care is not the best solution. However, it may be the only solution, particularly if it’s the only asset. Reverse mortgages may be an option.

Contingency reserve. A wealthy family with assets may simply earmark some assets for long-term care, setting aside a certain amount of money in an investment that can be liquidated without penalty.

Spending down to Medicaid. People with little or no retirement savings could end up depending on Medicaid. There are ways to protect assets for spouses, but it requires working with an elder law estate planning attorney in advance.

Reference: The Detroit News (June 10, 2019) “What to know about aging and long-term care costs”

Suggested Key Terms: Medicare, Medicaid, Long-Term Care Insurance, Hybrid Insurance, Nursing Homes, Retirement Savings

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