Why Professionals and High Net Worth Families Need Estate Planning

Why Professionals and High Net Worth Families Need Estate Planning

Even those whose daily tasks bring them close to death on a daily basis can be reluctant to consider having an estate plan done. However, any high-income earner needs to plan their estate to protect assets and prepare for incapacity. Estate planning also makes matters easier for loved ones, explains a recent article titled “Physician estate planning guide” from Medical Economics. An estate plan gets your wishes honored, minimizes court expenses and maintains family harmony.

Having an estate plan is needed by anyone, at any age or stage of life. A younger professional may be less inclined to consider estate planning. However, it’s a mistake to put it off.

Start by meeting with an experienced estate planning attorney in your home state. Have a power of attorney drafted to give a trusted person the ability to make decisions on your behalf should you become incapacitated. Not having this legal relationship leads to big problems. Your family will need to go to court to have a conservatorship or guardianship established to do something as simple as make a mortgage payment. Having a POA is a far better solution.

Next, talk with your estate planning attorney about a last will and testament and any trusts you might need. A will is a simpler method. However, if you have substantial assets, you may benefit from the protection a trust affords.

A will names your executor and expresses your wishes for property distribution. The will doesn’t become effective until after death when it’s reviewed by the court and verified during probate. The executor named in the will is then appointed to act on the directions in the will.

Most states don’t require an executor to be notified in advance. However, people should discuss this role with the person who they want to appoint. It’s not always a welcome surprise, and there’s no requirement for the named person to serve.

A trust is created to own property outside of the estate. It’s created and becomes effective while the person is still living and is often described as “kinder” to beneficiaries, especially if the grantor owns their practice and has complex business arrangements.

Trusts are useful for people who own assets in more than one state. In some cases, deeds to properties can be added into one trust, streamlining and consolidating assets and making it simpler to redirect after death.

Irrevocable trusts are especially useful to any doctor concerned about being sued for malpractice. An irrevocable trust helps protect assets from creditors seeking to recover assets.

Not being prepared with an estate plan addressing incapacity and death leads to a huge burden for loved ones. Once the plan is created, it should be updated every three to five years. Updating the plan is far easier than the initial creation and reflects changes in one’s life and in the law.

Reference: Medical Economics (Nov. 30, 2022) “Physician estate planning guide”

How Can an Elder Law Attorney Help Me?

How Can an Elder Law Attorney Help Me?

Seasons’ recent article entitled “Finding an elder care lawyer” discusses ways in which an experienced elder law attorney can help you.

Social Security. Did you know that you’re statistically more likely to achieve a positive outcome when you get help from a lawyer when approaching the Social Security Administration?

Elder attorneys know the steps they can take to get the Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) your senior deserves. Both of these programs can provide your senior with considerable financial assistance as they age.

Medicare and Medicaid planning. An elder attorney can accurately assess your eligibility and determine if it’s worth applying for Medicaid. If your application is denied, your attorney can also help you to appeal this decision.

An experienced Medicare lawyer can also help you to understand the various options available to you, letting you move forward and pursue the best possible health care assistance for your elder loved one. You may be paying more than necessary in premiums or out-of-pocket expenses, and a lawyer can guide you toward more suitable choices.

Probate. You may need to engage an elder law lawyer after your senior loved one has died. They can guide the entire family through this difficult time, assisting executors and ensuring that beneficiaries receive their inheritances.

While the probate process can be avoided entirely if your senior works with a qualified estate planning attorney prior to their death, there are several estate planning tools that can make inheriting assets much easier, including trusts.

With help from an experienced estate planning attorney, your senior can identify the most effective types of legal documents for their needs. Estate planning attorneys can also help with wills, advance directives, powers of attorney and more.

Reference: Seasons (Aug. 30, 2022) “Finding an elder care lawyer”

Is a Roth Conversion a Good Idea when the Market Is Down?

Is a Roth Conversion a Good Idea when the Market Is Down?

A stock market downturn may be a prime time for a Roth IRA conversion, reports CNBC’s recent article titled “Here’s why a Roth individual retirement account conversion may pay off in a down market.” This is especially true if you were considering a Roth conversion and never got around to it.

A Roth conversion allows higher earners to sidestep earnings limits for Roth IRA contributions, which are capped at $144,000 MAGI (Modified Adjusted Gross Income) for singles and $214,000 for married couples filing jointly in 2022.

Investors make non-deductible contributions to a pre-tax IRA, before converting funds to a Roth IRA. The tradeoff is the upfront tax bill created by contributions and earnings. The bigger the pre-tax balance, the more taxes you’ll pay on the conversion. However, the current market may make this a perfect time for a Roth conversion.

Let’s say you own a traditional IRA worth $100,000, and its value drops to $65,000. Ouch! However, you can save money by converting $65,000 to a Roth instead of $100,000. You’ll pay taxes on the $65,000, not $100,000.

According to Fidelity Investments, the first quarter of 2022 saw Roth conversions increase by 18%, compared to the first quarter of 2021. That was before the second quarter’s market volatility, which has been more dramatic.

The decision to do a Roth conversion can’t take place in a vacuum. Consider how many years of tax savings it will take to break even on the upfront tax bill. Weigh combined balances across any other IRA accounts, because of the “pro-rata rule,” which factors in your total pre-tax and after-tax funds to determine your tax costs.

Attractive features of the Roth IRA are the freedom to take—or not take—distributions when you want, and there are no taxes on the withdrawals. However, there is an exception, and it pertains to conversions—the five year rule.

If you do a conversion from a traditional IRA to a Roth IRA, you have to wait five years before making any withdrawals of the converted balance, regardless of your age. It’s an expensive mistake, with a 10% penalty. The clock begins running on January 1 of the year of the conversion. If you are close to retirement and will need funds within that timeframe, you’ll need other assets to live on.

However, there’s more. If the conversion increases your Adjusted Gross Income (AGI), it may create other issues. Medicare Part B calculates monthly premiums using Modified Adjusted Gross Income (MAGI) from two years prior, which means a higher income in 2022 will lead to higher Medicare bills in 2024.

Before doing a Roth conversion, evaluate your entire financial and retirement situation.

Reference: CNBC (May 10, 2022) “Here’s why a Roth individual retirement account conversion may pay off in a down market”

How Do I Find a Great Elder Law Attorney?

How Do I Find a Great Elder Law Attorney?

Zobuz’s recent article entitled “4 Tips for Hiring a Lawyer to Help with Medicaid Planning” says you may need to turn to an Elder Law attorney who can help you with Medicaid planning.

Here are some factors in choosing the best attorney:

Referrals and Recommendations. Look for an elder law attorney in the National Elder Law Foundation or the National Academy of Elder Law Attorneys database. You can also ask local agencies who work with seniors, such as the Alzheimer’s Association, AARP, as well as hospitals and nursing home social workers.

Experience. Elder law attorneys specialize in legal and financial issues that affect seniors. This includes areas such as estate planning and Medicaid planning. Look for an attorney who’s been successful in Medicaid planning and is board-certified in elder and special needs law.

Fees. Be sure that you understand how fees are structured. You should get a client engagement letter that outlines the services he or she will provide, as well as the fees they charge.

Customer Service. Dealing with Medicaid planning is a process that takes time. You need an attorney you can contact when you have questions.

A Few Other Thoughts…

Meet the elder law attorney in person for a consultation. This will help you to get a sense of his or her personality.

Look for a lawyer who will speak to you in a way you can understand and clarify points as needed.

Remember: if you don’t feel at ease with the attorney, look elsewhere.

When you select a qualified lawyer to help you with Medicaid planning and other medical insurance concerns, you will secure your future care.

Don’t risk your financial security or that of your family by waiting until it is too late.

Reference: Zobuz (April 22, 2022) “4 Tips for Hiring a Lawyer to Help with Medicaid Planning”

Key Dates for Planning Retirement

Key Dates for Planning Retirement

Just as there are many types of retirement benefits, there are many dates to keep in mind when creating a retirement plan. Some concern when you can make larger contributions to retirement accounts and others have to do with withdrawals. Knowing the dates for each matters to your retirement planning, according to the recent article title “10 Important Ages for Retirement Planning” from U.S. News & World Report.

When should you max out retirement savings contributions? The sooner you start saving for retirement, the more likely you’ll retire with robust tax-deferred accounts. Tax breaks and employer matches add up, as do compounding interest returns. The 401(k) contribution limit in 2021 is $19,500. Wage earners can deposit up to $6,000 in a traditional IRA or Roth IRA. If you’re in your peak earning years, traditional IRAs and 401(k)s may be better, since your tax bracket is likely higher to be higher than when you started out.

Catch-up contributions begin at age 50. Once you’ve turned 50, you can make catch up contributions to 401(k)s—up to $6,500—and up to $7,000 in traditional IRAs. That’s for 2021. If you’re able to take advantage of these contributions, you can put away additional money and qualify for even bigger tax deductions.

401(k) withdrawals could start at 55. If you left your job in the same year you hit the double nickel, you can take 401(k) withdrawals penalty-free from the account associated with your most recent job. The “Rule of 55” lets you avoid a 10% early penalty, but you’ll still have to pay income taxes on any withdrawals from a 401(k) account. However, if you roll a 401(k) account balance into an IRA, you’ll need to wait until age 59½ to take IRA withdrawals without any penalties.

When does the IRA retirement age begin? The magic number is 59½. However, traditional IRA distributions are not required until age 72. All traditional IRA withdrawals are also taxable.

Social Security eligibility begins at age 62. The earlier you start collecting Social Security, the smaller your monthly benefit. Your full retirement age depends upon your date of birth, when the benefit amount will be higher than at age 62. If you work after signing up for Social Security, your benefits could be temporarily withheld if your salary is higher than the annual earnings limit. If you retire before your full retirement age and earn more than $18,960 per year, for every $2 above this amount, your benefits will be reduced by $1. Benefits will be recalculated once you reach full retirement age.

Medicare eligibility begins at age 65. Enrollment in Medicare may take place during a seven-month period that begins three months before the month you turn 65. Signing up on time matters, because Medicare Part B premiums increase by 10% for every 12-month period you were eligible for benefits but failed to enroll. Are you delaying enrollment because you or your spouse is still covered by a group health plan at work? Make sure to sign up within eight months of leaving your job or health plan and avoid the penalty.

Social Security Full Retirement Age is 66 for most Baby Boomers. 67 is the full retirement age for workers born in 1960 or later. Millennials and younger generations qualify after age 67.

If you can wait until 70, you’ll max out on Social Security. Social Security benefits increase by 8% for each year you wait to start payments between Full Retirement Age and age 70. After age 70, the number remains the same.

RMDs begin for 401(k) and IRA retirement accounts at age 72. These mistakes here are expensive! Your first distribution must be taken by April 1 of the year you turn 72. After that, annual withdrawals from 401(k)s and traditional IRAs must be taken by December 31 of each year. Missing a required distribution and you’ll get hit with a nasty 50% of the amount that you should have withdrawn.

Reference: U.S. News & World Report (July 28, 2021) “10 Important Ages for Retirement Planning”

How Do I Find a Great Elder Law Attorney?

How Do I Find a Great Elder Law Attorney?

Elder law attorneys specialize in legal affairs that uniquely concern seniors and their adult children, says Explosion’s recent article entitled “The Complete Guide on How to Find an Elder Law Attorney.”

Finding the right elder law attorney can be a big task. However, with the right tips, you can find an experienced elder law attorney who is knowledgeable, has the right connections and fits your budget.

While, technically, a general practice attorney will be able to handle your retirement, Medicaid and even your estate planning, an elder law lawyer is deeply entrenched in elder law. This means he or she will have extensive knowledge and experience to handle any case within the scope of elder law, like the following:

  • Retirement planning
  • Long-term care planning and insurance
  • Medicaid
  • Estate planning
  • Social Security
  • Veterans’ benefits; and
  • Other related areas of law.

While a general practice lawyer may be able to help you with one or two of these areas, a competent elder law lawyer knows that there’s no single formula in elder law that applies across the board. That’s why you’ll need a lawyer with a high level of specialization and understanding to handle your specific circumstances. An elder law attorney is best suited for your specific needs.

A referral from someone you trust is a great place to start. When conducting your elder law lawyer search, stay away from attorneys who charge for their services by the hour. For example, if you need an elder law attorney to work on a Medicaid issue, they should be able to give you an estimate of the charges after reviewing your case. That one-time flat fee will cover everything, including any legal costs, phone calls, meetings and court fees.

When it comes to elder law attorneys, nothing says more than experience. An experienced elder law lawyer has handled many cases similar to yours and understands how to proceed. Reviewing the lawyer’s credentials at the state bar website is a great place to start to make sure the lawyer in question is licensed. The website also has information on any previous ethical violations.

In your search for an elder law attorney, look for a good fit and a high level of comfort. Elder law is a complex area of law that requires knowledge and experience.

Reference: Explosion (Aug. 19, 2020) “The Complete Guide on How to Find an Elder Law Attorney”

Why are Medicare Scams Increasing in the COVID-19 Pandemic?

Why are Medicare Scams Increasing in the COVID-19 Pandemic?

Medicare scams are increasing in the COVID-19 pandemic. Motley Fool’s recent article entitled “Seniors, Be Wary of These Medicare Scams During COVID-19” discusses some red flags you should look out for to avoid being a victim.

  1. Callers requesting your Medicare number. Medicare typically won’t call beneficiaries and randomly ask them to verify their benefits. If someone calls you and requests your Medicare ID number, don’t give them your information.
  2. Callers requesting your Social Security number. If a bad guy gets your Social Security number, he can do a number of things with that information, any of which will create headaches for you. This includes opening a credit card in your name and charging a lot of expenses on it. If you get a caller who says he’s a Medicare representative who needs your Social Security number to process a health claim, don’t give it to him.
  3. Email or phone calls asking you to send money. Medicare doesn’t sell prescriptions over the phone or ask seniors to pre-pay for services. If someone calls asking you to send money or give out credit card information, it’s a bogus caller.
  4. A promise for early access to a COVID-19 treatment or vaccine. Right now, there is no COVID-19 vaccine. There is also no mail-order treatment that you can stock up on to protect yourself in case you’re struck with the virus. Therefore, don’t believe a caller who says he’s from Medicare and is offering you a chance to get in on a groundbreaking medication. Don’t pay him or share your Medicare ID number during that conversation. When an effective vaccine is available, Medicare will pay for it and let you know how to get it.
  5. Someone at your door claiming to be from Medicare. Medicare doesn’t have sales reps. Therefore, if someone says they’re from Medicare, lock the door and demand that that person leave immediately. Call the police, if you need help.

When a lot of seniors are worried, isolated, and in financial straits, they don’t need to fall victim to a scam. Be prepared and be aware of what common fraud attempts look like. That way, you’ll be in a good position to protect yourself.

If you receive a suspicious email or phone call, report it at 1-800-MEDICARE. This might prevent another senior from falling victim to what could be an extremely dangerous trap.

Reference: Motley Fool (May 25, 2020) “Seniors, Be Wary of These Medicare Scams During COVID-19”