Understanding the Issues of Elder Law

The legal needs of many older Americans go beyond basic legal services. They are also all intertwined. In addition to understanding the legal issues and complications that older Americans face, elder law attorneys must also understand the surrounding personal concerns of their clients, such as health, financial and family issues, and how those affect their clients’ legal issues.

Recently Heard’s article entitled “What You Need to Know About Elder Law” explains that other specific areas of expertise include the following:

  • End of life planning could extend to planning your health care support system as you age, signing a power of attorney, establishing a living will and other issues surrounding end of life care.
  • Financial issues frequently entails questions about retirement and financial planning, housing financing, income and estate tax planning and gift tax issues.
  • Long term care can include planning for asset protection, insurance for in-home care or assistance with activities of daily living, Medicare planning, insurance, veterans’ benefits and other issues.
  • Residents’ rights issues may include claims or complaints you bring while a patient in a nursing home or long term care facility.
  • Workplace discrimination issues stem, from the fact that older Americans sometimes face age and disability discrimination in the workplace.
  • Guardianship issues might include guardianship avoidance, planning wills and trusts, planning for the future of a special needs child, probate court and other issues surrounding minor or adult children.
  • Landlord-tenant law may mean handling disputes with landlords, contesting an eviction, dealing with foreclosure issues, rent increases and more.
  • Abuse, neglect, and fraud. These elder law attorneys specialize in cases where an older client is being victimized.

An elder law attorney can be a great partner for you as you plan out the legal and financial aspects of the next stage of your life-or the life of a loved one. Speak to one today.

Reference: Recently Heard (June 23, 2022) “What You Need to Know About Elder Law”

Senior Second Marriages and Estate Planning

For seniors enjoying the romance and vitality of an unexpected late-in-life engagement, congratulations! Love is a wonderful thing, at any age. However, anyone remarrying for the second, or even third time, needs to address their estate planning as well as financial plans for the future. Pre-wedding planning can make a huge difference later in life, advises a recent article from Seniors Matter titled “Your senior parent is getting remarried—just don’t ignore key areas.”

A careful review of your will, powers of attorney, healthcare proxy, living will and any other advance directives should be made. If you have new dependents, your estate planning attorney will help you figure out how your children from a prior marriage can be protected, while caring for new members of the family. Failing to adjust your estate plan could easily result in disinheriting your own offspring.

Deciding how to address finances is best done before you say, “I do.” If one partner has more assets than the other, or if one has more debts, there will be many issues to resolve. Will the partner with more assets want to help resolve the debts, or should the debts be cleared up before the wedding? How will bills be paid? If both partners own homes, where will the newlyweds live?

Do you need a prenuptial agreement? This document is especially important when there are significant assets owned by one or both partners. One function of a prenup is to prevent one partner from challenging the other person’s will and trusts. There are a number of trusts designed to protect loved ones including the new spouse, among them the Qualified Terminable Interest Property Trust, known as a QTIP. This trust provides support for the new spouse. When the spouse dies, the entire trust is transferred to the persons named in the trust, usually children from a first marriage.

Most estate planning attorneys recommend two separate wills for people who wed later in life. This makes distribution of assets easier. Don’t neglect updating Powers of Attorney and any health care documents.

Before walking down the aisle, make an inventory, if you don’t already have one, of all accounts with designated beneficiaries. This should include life insurance policies, pensions, IRAs, 401(k)s, investment accounts and any other property with a beneficiary designation. Make sure that the accounts reflect your current circumstances.

Sooner or later, one or both spouses may need long-term care. Do either of you have long-term care insurance? If one of you needed to go into a nursing home or have skilled care at home, how would you pay for it? An estate planning attorney can help you create a plan for the future, which is necessary regardless of how healthy you may be right now.

Once you are married, Social Security needs to be updated with your new marital status and any name change. If a parent marries after full retirement age and their new spouse’s benefit is higher than their own, they may be able to increase their benefits to 50% of the new spouse’s benefits. If they were receiving divorced spousal benefits, those will end. The same goes for survivor benefits, if the person marries before age 60. If they’re disabled, they may still receive those benefits after age 60.

Setting up an appointment with an estate planning attorney a few months before a senior wedding is a good idea for all concerned. It provides an opportunity to review important legal and financial matters, while giving both spouses time to focus on the “business” side of love.

Reference: Seniors Matter (April 29, 2022) “Your senior parent is getting remarried—just don’t ignore key areas”

What Happens Financially when a Spouse Dies?

Losing a beloved spouse is one of the most stressful events in life, so it’s one we tend not to talk about. However, planning for life after the passing of a spouse needs to be done, as it is an eventuality. According to a recent article from AARP Magazine, “The Financial Penalty of Losing Your Spouse,” the best time to plan for this is before your spouse dies.

You’ll have the most options while your spouse is still living. Estate plans, wills, trusts, and beneficiary designations can still be updated, as long as your spouse has legal capacity. You can make sure you’ll still have access to savings, retirement, and investment accounts. Create a list of assets, including information needed to access digital accounts.

Make sure that your credit cards will be available. Many surviving spouses only learn after a death whether credit cards are in the spouse’s name or their own name.

Get help from professionals. Review your new status with your estate planning attorney, CPA and financial advisor. This includes which accounts need to be moved and which need to be renamed. Can you afford to maintain your home? An experienced professional who works regularly with widows or widowers can provide help, if you are open to asking.

A warning note: Be careful about new “friends.” Widows are key targets of scammers, and thieves are very good at scamming vulnerable people.

Be strategic about Social Security. If both partners were drawing benefits, the surviving spouse may elect the higher benefit going forward. If you haven’t claimed yet, you have options. You can take either a survivor’s benefit based on your spouse’s work history, or the retirement benefit based on your own work history. You will be able to switch to the higher benefit, if it ends up being higher, later on.

Be careful about your spouse’s 401(k) and IRA. If you’re in your 50s, you are allowed to roll your spouse’s 401(k) or IRA into your own account. However, don’t rush to move the 401(k). You can make a withdrawal from a late spouse’s 401(k) without penalty. However, it will be taxable as ordinary income. If you move the 401(k) to a rollover IRA, you’ll have to pay taxes plus a 10% penalty on any withdrawals taken from the IRA before you reach 59 ½. Your estate planning attorney can help with these accounts.

Use any advantages available to you. The IRS will still let you file jointly in the year of your spouse’s death. Tax rates are better for married filers than for singles. Any taxable withdrawals you’ll need to take from 401(k)s or IRAs may be taxed at a lower rate during this year. You may decide to use the money to create a rollover Roth IRA or to put some funds into a non-tax deferred account.

Don’t rush to do anything you don’t have to do. Selling your home, writing large checks to children, or moving are all things you should not do right now. Decisions made in the fog of grief are often regretted later on. Take your time to mourn, adjust to your admittedly unwanted new life and give yourself time for this major adjustment.

Reference: AARP Magazine (May 13, 2022) “The Financial Penalty of Losing Your Spouse”

Will Moving to a New State Impact My Estate Planning?

Since the coronavirus pandemic hit the U.S., baby boomers have been speeding up their retirement plans. Many Americans have also been moving to new states. For retirees, the non-financial considerations often revolve around weather, proximity to grandchildren and access to quality healthcare and other services.

Forbes’ recent article entitled “Thinking of Retiring and Moving? Consider the Financial Implications First” provides some considerations for retirees who may set off on a move.

  1. Income tax rates. Before moving to a new state, you should know how much income you’re likely to be generating in retirement. It’s equally essential to understand what type of income you’re going to generate. Your income as well as the type of income you receive could significantly influence your economic health as a retiree, after you make your move. Before moving to a new state, look into the tax code of your prospective new state. Many states have flat income tax rates, such as Massachusetts at 5%. The states that have no income tax include Alaska, Florida, Nevada, Texas, Washington, South Dakota and Wyoming. Other states that don’t have flat income tax rates may be attractive or unattractive, based on your level of income. Another important consideration is the tax treatment of Social Security income, pension income and retirement plan income. Some states treat this income just like any other source of income, while others offer preferential treatment to the income that retirees typically enjoy.
  2. Housing costs. The cost of housing varies dramatically from state to state and from city to city, so understand how your housing costs are likely to change. You should also consider the cost of buying a home, maintenance costs, insurance and property taxes. Property taxes may vary by state and also by county. Insurance costs can also vary.
  3. Sales taxes. Some states (New Hampshire, Oregon, Montana, Delaware and Alaska) have no sales taxes. However, most states have a sales tax of some kind, which generally adds to the cost of living. California has the highest sales tax, currently at 7.5%, then comes Tennessee, Rhode Island, New Jersey, Mississippi and Indiana, each with a sales tax of 7%. Many other places also have a county sales tax and a city sales tax. You should also research those taxes.
  4. The state’s financial health. Examine the health of the state pension systems where you are thinking about moving. The states with the highest level of unfunded pension debts include Connecticut, Illinois, Alaska, New Jersey and Hawaii. They each have unfunded state pensions at a level of more than 20% of their state GDP. If you’re thinking about moving to one of those states, you’re more apt to see tax increases in the future because of the huge financial obligations of these states.
  5. The overall cost of living. Examine your budget to see the extent to which your annual living expenses might increase or decrease in your new location because food, healthcare and transportation costs can vary by location. If your costs are going to go up, that should be all right, provided you have the financial resources to fund a larger expense budget. Be sure that you’ve accounted for the differences before you move.
  6. Estate planning considerations. If this is going to be your last move, it’s likely that the laws of your new state will apply to your estate after you die. Many states don’t have an estate or gift tax, which means your estate and gifts will only be subject to federal tax laws. However, a number of states, such as Maryland and Iowa, have a state estate tax.

You should talk to an experienced estate planning attorney about the estate and gift tax implications of your move.

Reference: Forbes (Nov. 30, 2021) “Thinking of Retiring and Moving? Consider the Financial Implications First”

What Power Does an Executor Have?

Being asked to serve as an executor is a big compliment with potential pitfalls, advises the recent article “How to Prepare to Be an Executor of an Estate” from U.S. News & World Report. You are being asked because you are considered trustworthy and able to handle complex tasks. That’s flattering, of course, but there’s a lot to know before making a final decision about taking on the job.

An executor of an estate helps file paperwork, close accounts, distribute assets of the deceased, deal with probate and any court filings and navigate family dynamics. Some of the tasks include:

  • Locating critical documents, like the will, any trusts, deeds, vehicle titles, etc.
  • Obtaining death certificates.
  • Overseeing funeral arrangements and memorial services, if any.
  • Filing the will in probate court.
  • Creating an estate bank account, after obtaining an estate tax number (EIN).
  • Notifying organizations, including Social Security, pension accounts, etc.
  • Paying creditors.
  • Distributing assets.
  • Overseeing the sale or transfer of real estate
  • Filing estate tax returns and final tax returns.

If you are asked to become the executor of an estate for a loved one, it’s a good idea to gather as much information as possible while the person is still living. It will be far easier to tackle the tasks, if you have been set up to succeed. Find out where their estate planning documents are and read the documents to make sure you understand them. If you don’t understand, ask, and keep asking until you do. Similarly, obtain information about all assets, including joint assets. Find out if there are any family members who may pose a challenge to the estate.

Today’s assets include digital assets. Ask for a complete list of the person’s online accounts, usernames and passwords. You will also need access to their devices: desktop computer, laptop, tablet, phone and smart watch. Discuss what they want to happen to each account and see if there is an option for you to become a co-owner of the account or a legacy contact.

Many opt to have an estate planning attorney manage some or all of these tasks, as they can be very overwhelming. Frankly, it’s hard to administer an estate at the same time you’re grieving the loss of a loved one.

As executor, you are a fiduciary, meaning you’re legally required to put the deceased’s interests above your own. This includes managing the estate’s assets. If the person owned a home, you would need to secure the property, pay the mortgage and/or property taxes and maintain the property until it is sold or transferred to an heir. Financial accounts need to be managed, including investment accounts.

The amount of time this process will take, depends on the complexity and size of the estate. Most estates take at least twelve months to complete all of the administrative work. It is a big commitment and can feel like a second job.

A few things vary by state. Convicted felons are never permitted to serve as executors, regardless of what the will says. A sole executor must be a U.S. citizen, although a non-citizen can be a co-executor, if the other co-executor is a citizen. Rules also vary from state to state regarding being paid for your time. Most states permit a percentage of the size of the estate, which must be considered earned income and reported on tax returns.

Be very thorough and careful in documenting every decision made as the executor to protect yourself from any future challenges. This is one job where trying to do it on your own could have long-term effects on your relationship with the family and financial liability, so take it seriously. If it’s too much, an estate planning attorney can help.

Reference: U.S. News & World Report (Dec. 22, 2021) “How to Prepare to Be an Executor of an Estate” 

Do I Have to Give My Husband’s Children from First Marriage Anything When He Dies?”

This is a common question with second (or third marriages) and blended families. Questions frequently arise about Social Security, investments and savings, when the husband is divorced from the children’s mother and is paying child support until each child turns 18.

Nj.com’s recent article entitled “Are my husband’s kids from another marriage due assets when he dies?” says that these questions demonstrate why estate planning is critical to revisit after a divorce. You can take action to make certain that you’re taken care of, but if you don’t do this at the time of the divorce, it could be too late.

Let’s look at what you should know about beneficiaries and wills. First, beneficiary designations supersede a will. Make sure that all beneficiaries and contingent beneficiaries are consistent with your wishes. There are beneficiary designations on retirement accounts, pensions, life insurance policies, annuities and other accounts that take precedence over what may be stated in a will.

While New Jersey does not provide for beneficiary designations on certain assets like a house, vehicles, and real estate, many other states do. For assets without a beneficiary, it’s important to determine the way in which they’re titled.

The titling of assets has an effect on how the assets will be distributed after death. Thus, when married again, spouses should review and update their wills to have an idea of how a spouse’s estate would be disbursed at his or her death.

If a husband is paying child support, divorce decrees will often dictate that he purchase life insurance to cover that obligation upon his death. Therefore, there may be a life insurance policy for the children from a first marriage.

With Social Security, if a spouse remains unmarried after the spouse’s death, he or she can claim a survivor spousal benefit as early as age 60, and if he or she is caring for the spouse’s children from the first marriage who are under 16 years of age, he or she may be entitled to receive a payment earlier. The deceased spouse’s unmarried children can also claim a survivor benefit until age 18, or longer if in high school or disabled.

Reference: nj.com (Aug. 4, 2021) “Are my husband’s kids from another marriage due assets when he dies?”

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”