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Estate Planning Matters for Singles

Edmond legacy and estate planning for individuals in their peak earning years in EdmondEstate planning matters for singles, too.  If you’re not married and you have relatives or friends to whom you would like to pass certain assets, then you need an estate plan, says the article “Estate planning important even if you’re not married” from Rocky Mountain Telegram.

If you die without a last will and testament or other estate planning documents in place, a probate court will make the decisions about how to distribute assets according to the laws of your state. That may not be what you wanted, but it will be too bad—and too late.

If you want to leave assets to family members or close friends, you’ll need to plan for this with a last will and testament. The same goes for any donations you may wish to leave to one or more charitable organizations. You could just name organizations in your will, but there are many different ways to give to charity and some have tax benefits for you and your heirs.

One way to leave assets to charity is a Charitable Remainder Trust. Your estate planning attorney will help guide you through the steps. Appreciated assets, like stocks, mutual funds, or other investment securities, are transferred into an irrevocable trust. You get to name the trustee—you could be the trustee, if you prefer—and then you can sell the assets at full market value, avoiding any capital gains taxes that you’d pay if you sold them as an individual.

If you itemize your income taxes, you might be able to claim a charitable deduction on taxes. With the proceeds, the trust can purchase income-producing assets and provide an income stream for the rest of your life. When you die, the assets remaining in the trust will go to the charity or charities that you have named.

Family members and charities aren’t the only ones to consider in an estate plan for a single person. You need to prepare to protect yourself. With the absence of an immediate family, being protective of your financial and health care decisions requires a durable power of attorney and a health care proxy, among other documents.

The durable power of attorney authorizes a person of your choice to manage finances, if you were to become incapacitated. This is especially important when there is no spouse to take on this role. Your health care proxy, also known as a medical power of attorney, authorizes someone you name to make health care decisions on your behalf, if you are unable.

Estate planning can be complex. An experienced estate planning attorney will be an invaluable resource as you go through the process. Who will be the best candidate to select as your power of attorney? What other documents do you need to ensure that your assets go to the people or charities you want? Once this is done, you’ll be prepared for the future—and protected.

Reference: Rocky Mountain Telegram (June 6, 2021) “Estate planning important even if you’re not married”

 

Why Is a Fiduciary Important?

Fiduciary duties for trusteesWhat is a fiduciary and why is a fiduciary important?  If you do not choose a fiduciary, a guardian appointed by a court may end up making financial and medical decisions for you and the intestate statutes of your state will determine who will administer your estate when you have passed. If you’d rather have some control over your life, doing some estate planning now will prevent these scenarios later, according to the article “Fiduciary Agents have power to make decisions you’d prefer to make yourself” from the Pocono Record.

A financial fiduciary is the person you designate under your general durable power of attorney, last will and testament, or trust.

The fiduciary under a power of attorney has the power to make decisions, while you are living, for your financial and legal affairs. The person is named in a legal document called an agent or attorney in fact. This document can be broad, allowing the person to determine how to spend or invest your money, to buy and/or sell your home, etc., or it can permit someone to act on your behalf solely for a specific transaction. You and your estate planning attorney determine what is best.

An agent under a healthcare proxy can make healthcare decisions on your behalf, when you are unable to communicate for yourself because of a severe illness or an injury, or a cognitive condition. It is very important to understand that if you are already incapacitated, you cannot sign documents giving anyone else these powers. They must be prepared before they are needed!

Some people prefer to have one person serve as both their agent for finances and for healthcare. This allows one person who understands your physical and mental needs to make decisions about home care, assisted living or a skilled nursing facility and have access to the resources to pay for these services. This also means that one person is applying for any government benefits to help pay for this care.

There are times when designating two different agents creates conflict, if the two people don’t agree on the appropriate type of care. One may be more concerned with spending down resources, while another may wish you to receive 24/7 care.

If you appointed someone to serve as your fiduciary many years ago, it is so important that your documents be reviewed and updated. Do you still want that same person to make critical decisions on your behalf? Are they still able or willing to serve? If the person you have chosen lives in another state and wants you to be moved to where they live, will that work for you and your family?

If you have not reviewed your estate plan and your power of attorney documents in recent years, it is strongly recommended you do so now. Many families are now grappling with the results of outdated planning, or no planning at all. Having an updated estate plan and all of the related documents provides peace of mind for you and your loved ones.

Reference: Pocono Record (June 1, 2021) “Fiduciary Agents have power to make decisions you’d prefer to make yourself”

 

How Do Special Needs Trusts Work?

estate planning faqMany may as what is a special needs trust and how do special needs trust work?  Special-needs trusts have been used for many years. However, there are two factors that are changing and parents need to be aware of them, says the article “Special-Needs Trusts: How They Work and What Has Changed” from The Wall Street Journal. For one thing, many people with disabilities and chronic illnesses are leading much longer lives because of medical advances. As a result, they are often outliving their parents and primary caregivers. This makes planning for the long term more critical.

Second, there have been significant changes in tax laws, specifically laws concerning inherited retirement accounts.

Special needs planning has never been easy because of the many unknowns. How much care will be needed? How much will it cost? How long will the special needs individual live? Tax rules are complex and coordinating special needs planning with estate planning can be a challenge. A 2018 study from the University of Illinois found that less than 50% of parents of children with disabilities had planned for their children’s future. Parents who had not done any planning told researchers they were just overwhelmed.

Here are some of the basics:

A Special-Needs Trust, or SNT, is created to protect the assets of a person with a disability, including mental or physical conditions. The trust may be used to pay for various goods and services, including medical equipment, education, home furnishings, etc.

A trustee is appointed to manage all and any spending. The beneficiary has no control over assets inside the trust. The assets are not owned by the beneficiary, so the beneficiary should continue to be eligible for government programs that limit assets, including Supplemental Security Income or Medicaid.

There are different types of Special Needs Trusts: pooled, first party and third party. They are not simple entities to create, so it’s important to work with an experienced estate elder law attorney who is familiar with these trusts.

To fund the trust after parents have passed, they could name the Special Needs Trust as the beneficiary of their IRA, so withdrawals from the account would be paid to the trust to benefit their child. There will be required minimum distributions (RMDs), because the IRA would become an Inherited IRA and the trust would need to take distributions.

The SECURE Act from 2019 ended the ability to stretch out RMDs for inherited traditional IRAs from lifetime to ten years. However, the SECURE Act created exceptions: individuals who are disabled or chronically ill are still permitted to take distributions over their lifetimes. This has to be done correctly, or it won’t work. However, done correctly, it could provide income over the special needs individual’s lifetime.

The strategy assumes that the SNT beneficiary is disabled or chronically ill, according to the terms of the tax code. The terms are defined very strictly and may not be the same as the requirements for SSI or Medicaid.

The traditional IRA may or may not be the best way to fund an SNT. It may create larger distributions than are permitted by the SNT or create large tax bills. Roth IRAs or life insurance may be the better options.

The goal is to exchange assets, like traditional IRAs, for more tax-efficient assets to reach post-death planning solutions for the special needs individual, long after their parents and caregivers have passed.

Reference: The Wall Street Journal (June 3, 2021) “Special-Needs Trusts: How They Work and What Has Changed”

 

Will Medicaid Come after My Estate?

Edmond estate planning when divorcedA common question is will medicaid come after my estate and if so it is also very confusing when the estate recovery process begins with Medicaid, says nj.com’s recent article entitled “When will Medicaid recover funds from this estate?”

Under federal and state laws, the state Medicaid program is required to recover funds from the estates of Medicaid recipients who were 55 years of age or older at the time they received Medicaid benefits. This can be nursing facility services, home and community-based services and related hospital and prescription drug services. States have the option to recover payments for all other Medicaid services provided to these individuals, except Medicare cost-sharing paid on behalf of Medicare Savings Program beneficiaries.

In some situations, the money left in a trust after a Medicaid enrollee has passed away, may also be used to reimburse Medicaid. However, states can’t recover from the estate of a deceased Medicaid enrollee who’s survived by a spouse, child under age 21, or blind or disabled child of any age. States also must establish procedures for waiving estate recovery, when recovery would cause an undue hardship.

States may also impose liens for Medicaid benefits incorrectly paid pursuant to a court judgment.

States can impose liens on real property during the lifetime of a Medicaid enrollee who’s permanently institutionalized, except when one of the following individuals resides in the home:

  • a spouse
  • a child under age 21
  • a blind or disabled child of any age; or
  • a sibling who has an equity interest in the home.

States must remove the lien, when the Medicaid enrollee is discharged from the facility and returns home.

Note that any property that belonged to the deceased Medicaid recipient at the time of their death is subject to estate recovery, even when that property was owned jointly or individually.

Therefore, Medicaid postpones estate recovery, if there is a surviving spouse or a surviving child who is under the age of 21, or is blind or permanently and totally disabled in accordance with the Social Security definition of disability.

Given that the father in this case passed away in February 2020 with a surviving spouse, Medicaid will postpone estate recovery until the mother dies.

Reference: nj.com (May 26, 2021) “When will Medicaid recover funds from this estate?”

 

What Should I Do in Retirement?

Legacy and estate planning for people near retirement in EdmondSome people think of retirement as not who you are or where you are in life, but instead as the transition of your time and money. Think of it as a process you go through, and not your identity.

The transition for money is a transition from accumulating money to using it. With time, it is also a transition of reallocating the many hours every week you spent working.

Kiplinger’s recent article entitled “Living a Life of Purpose after Retirement: 3 Action Steps to Take” explains that this distinction of what retirement means is an important one to make.

That’s because the default answer and mindset that “I’m retired” leaves people stuck. As a result, they don’t truly progress toward reinventing themselves. In effect, they’ve made retirement their new identity, which just seems odd considering when you say something is “retired” it often means that it’s no longer useful.

However, this may not be an accurate description for most successful people who’ve lived a life of purpose, who’ve gained valuable insight and wisdom from their life experiences and who’ve refined their talents and unique abilities over decades.

Therefore, the word “retirement” shouldn’t be a label used to describe who someone is. That’s because it’s not their identity. Instead, “retirement” is a term that is used to describe the transition a person is going through from one phase of life to another.

It’s significant because the success of your retirement transition is dependent upon the ease with which you understand this distinction and your ability to shift your mindset in the following three key areas.

Reinvent Yourself. Every day up until your retirement transition, you dedicated many hours each day to someone or something to earn a living. That manifested as a sense of purpose. However, when that time commitment goes away, so can that sense of purpose. Therefore, think about the transition of retirement as the transition to what’s next. It’s your chance to reinvent yourself and live out the second half of your life with purpose.

Reframe Your Mindset About Money. Many people envision a life of abundance for themselves or being able to leave a financial legacy for their children and grandchildren. However, measuring your financial success based solely on rate of return or how much money is in your bank account is the wrong measurement. Instead, it should be on how much income you can generate from your assets that’s consistent and predictable. This income from your assets gives you freedom to dedicate your talents to pursue your purpose.

Reframe Your Mindset of Time. Have the choice to imagine your own future, and when you change the time frame you are operating in, you change the way you think. This gives you the freedom to reframe your future and reprogram your thinking about how to live the second half of your life.

The key to a successful retirement transition is to reframe your mindset about money, focus on maximizing cash flow, expand your concept of time and reinvent your purpose in life.

Reference: Kiplinger (May 26, 2021) “Living a Life of Purpose after Retirement: 3 Action Steps to Take”

 

Top Dos in Estate Planning?

Spotlight News’ recent article entitled “Estate Planning To-Dos” says that with the potential for substantial changes to estate and gift tax rules under the Biden administration, this may be an opportune time to create or review our estate plan. If you are not sure where to begin, look at these to-dos for an estate plan.

See an experienced estate planning attorney to discuss your plans. The biggest estate planning mistake is having no plan whatsoever. The top triggers for estate planning conversations can be life-altering events, such as a car accident or health crisis. If you already have a plan in place, visit your estate planning attorney and keep it up to date with the changes in your life.

Draft financial and healthcare powers of attorney. Estate plans contain multiple pieces that may overlap, including long-term care plans and powers of attorney. These say who has decision-making power in the event of a medical emergency.

Draft a healthcare directive. Living wills and other advance directives are written to provide legal instructions describing your preferences for medical care, if you are unable to make decisions for yourself. Advance care planning is a process that includes quality of life decisions and palliative and hospice care.

Make a will. A will is one of the foundational aspects of estate planning, However, this is frequently the only thing people do when estate planning. A huge misconception about estate planning is that a will can oversee the distribution of all assets. A will is a necessity, but you should think about estate plans holistically—as more than just a will. For example, a modern aspect of financial planning that can be overlooked in wills and estate plans is digital assets.  It is also recommended that you ask an experienced estate planning attorney about whether a trust fits into your circumstances, and to help you with the other parts of a complete estate plan.

Review beneficiary designations. Retirement plans, life insurance, pensions and annuities are independent of the will and require beneficiary designations. One of the biggest estate planning mistakes is having outdated beneficiary designations, which only supports the need to review estate plans and designated beneficiaries with an experienced estate planning attorney on a regular basis.

Reference: Spotlight News (May 19, 2021) “Estate Planning To-Dos”

 

What Health Issues to Look for after 50

Edmond estate planning when divorcedAfter you hit the BIG 5-0, it’s time to really start tuning in to your health. AARP’s recent article entitled “7 Common Health Problems That Can Strike After 50” says that doctors see some chronic health conditions, which are frequently diagnosed beginning at age 50.  What health issues to look for after 50 is important and here are some things to look for:

  1. High blood pressure. When thinking about what health issues to look for after 50,this issue is a major risk factor for heart disease and stroke. Arteries begin to stiffen and become less elastic, creating more pressure in them. However, high blood pressure is manageable with medication and lifestyle modifications, such as diet and exercise. Have your blood pressure checked at least every year, once you hit 50. You want to see a reading at or below 120/80, which is considered normal by the American Heart Association. Anything over 130 on the top number (the systolic reading) is considered high and warrants a conversation with your doctor about possible treatments.
  2. High cholesterol. Another contributor to heart disease is high cholesterol. This can build up on the inside of blood vessels over time and form plaque that slows or blocks blood flow. Plaque can also break loose and cause a blood clot, even a heart attack or stroke. Similar to high blood pressure, your risk for developing high cholesterol increases with age. Check your numbers regularly throughout midlife with a routine blood test that can be done at the doctor’s office. Diet and exercise can help lower cholesterol, along with medication.
  3. Diabetes. This is another common condition that appears frequently in your 50s. More than 34 million Americans have diabetes, and most of them have type 2 diabetes. Those in middle age are most at risk. Diabetes can usually be managed with lifestyle changes.
  4. Arthritis. A condition that appears in your 50s that is frequently overlooked or dismissed is arthritis — especially osteoarthritis. That is the “wear-and-tear” kind of arthritis that happens when the joint cartilage between bones is damaged or breaks down. If you notice joint pain or stiffness from regular activity, see your doctor.
  5. Osteoporosis. Women, in particular, need to pay attention to their bone health when they reach 50 because it’s when osteoporosis, or the weakening of the bones becomes most common. About 20% of women 50 and older have osteoporosis, since one of the risk factors for osteoporosis is eing postmenopausal. When the body stops making estrogen, bone density typically decreases. Walking and upper-body strength training can help reduce the risk for developing osteoporosis, along with paying attention to your calcium intake and vitamin D levels, both of which are important to bone health.
  6. Cancer. Advancing age is the biggest risk factor for cancer, so having routine screenings is important in your 50s. Women in this age group should get a mammogram at least every two years to screen for breast cancer, and men should talk to their health care providers about prostate cancer screenings. Colon cancer screenings also become more regular for both genders.
  7. Anxiety/depression. About 20% of those over 55 have some type of mental health concern, according to the CDC. Anxiety and depression are among the most common conditions. Remember that your brain is just like any other organ. Keeping it healthy is critical.

Reference: AARP (May 18, 2021) “7 Common Health Problems That Can Strike After 50”

 

Are 529 Plans Part of Your Estate?

Estate Planning in Edmond OklahomaEstate planning attorneys, accountants and CPAs say that 529s are more than good ways to save for college. They’re also highly flexible estate planning tools, useful far beyond education spending, that cost practically nothing to set up. In the very near future, the role of 529s could expand greatly, according to the article “A Loophole Makes ‘529’ Plans Good Wealth Transfer Tools. Here’s How to Use Them” from Barron’s.  Many may then ask are 529 plans part of your estate?

Most tactics to reduce the size of an estate are irrevocable and cannot be undone, but the 529 allows you to change the beneficiaries of a 529 account. Even the owners can be changed multiple times. Here’s how they work, and why they deserve more attention.

The 529 is funded with after tax dollars, and all money taken out of the account, including investment gains, is tax fre,e as long as it is spent on qualified education expenses. That includes tuition, room and board and books. What about money used for non-qualified expenses? Income taxes are due, plus a 10% penalty. Only the original contribution is not taxed, if used for non-qualified expenses.

Most states have their own 529 plans, but you can use a plan from any state. Check to see if there are tax advantages from using your state’s plan and know the details before you open an account and start making contributions.

Each 529 account owner must designate a single beneficiary, but money can be moved between beneficiaries, as long as they are in the same family. You can move money that was in a child’s account into their own child’s account, with no taxes, as long as you don’t hit gift tax exclusion levels.

In most states, you can contribute up to $15,000 per beneficiary to a 529 plan. However, each account owner can also pay up to five years’ worth of contributions without triggering gift taxes. A couple together may contribute up to $150,000 per beneficiary, and they can do it for multiple people.

There are no limits to the number of 529s a person may own. If you’re blessed with ten grandchildren, you can open a 529 account for each one of them.

For one family with eight grandchildren, plus one child in graduate school, contributions were made of $1.35 million to various 529 plans. By doing this, their estate, valued at $13 million, was reduced below the federal tax exclusion limit of $11.7 million per person.

Think of the money as a family education endowment. If it’s needed for a crisis, it can be accessed, even though taxes will need to be paid.

To create a 529 that will last for multiple generations, provisions need to be made to transfer ownership. Funding 529 plans for grandchildren’s education must be accompanied by designating their parents—the adult children—as successor owners, when the grandparents die or become incapacitated.

The use of 529s has changed over the years. Originally only for college tuition, room and board, today they can be used for private elementary school or high school. They can also be used to take cooking classes, language classes or career training at accredited institutions. Be mindful that some expenses will not qualify—including transportation costs, healthcare and personal expenses.

Reference: Barron’s (May 29, 2021) “A Loophole Makes ‘529’ Plans Good Wealth Transfer Tools. Here’s How to Use Them”

 

What Is Elder Law?

estate planning faqWith medical advancements, the average age of both males and females has increased incredibly.  The issue of a growing age population is also deemed to be an issue legally. That is why there are elder law attorneys.  If there are elder law attorneys then a question to ask is what is elder law?

Recently Heard’s recent article entitled “What Are the Major Categories That Make Up Elder Law?” explains that the practice of elder law has three major categories:

  • Estate planning and administration, including tax issues
  • Medicaid, disability, and long-term care issues; and
  • Guardianship, conservatorship, and commitment issues.

Estate Planning and Administration. Estate planning is the process of knowing who gets what. With a will in place, you can make certain that the process is completed smoothly. You can be relieved to know that your estate will be distributed as you intended. Work with an experienced estate planning attorney to help with all the legalities, including taxes.

Medicaid, Disability, and Long-Term Care Issues. Elder law evolved as a special area of practice because of the aging population. As people grow older, they have more medically-related issues. Medicaid is a state-funded program that supports those with little or no income. The disability and long-term care issues are plans for those who need around-the-clock care. Elder law attorneys help coordinate all aspects of elder care, such as Medicare eligibility, special trust creation and choosing long-term care options.

Guardianship, Conservatorship, and Commitment Matters. This category is fairly straightforward. When a person ages, a disability or mental impairment may mean that he or she cannot act rationally or make decisions on his or her own. A court may appoint an individual to serve as the guardian over the person or as the conservator the estate, when it determines that it is required. The most common form of disability requiring conservatorship is Alzheimer’s, and a court may appoint an attorney to be the conservator, if there is no appropriate relative available.

Reference: Recently Heard (May 26, 2021) “What Are the Major Categories That Make Up Elder Law?”

 

Why Is Estate Planning So Important?

Estate Planning in Edmond OklahomaMany will as why is estate planning so important?  “Estate planning” will be your family’s guidebook once you have passed away. The Big Easy Magazine’s recent article entitled “Estate Planning Is Essential and Here’s Whyexplains that estate planning is similar to writing a last will. HOwever, writing one is not limited to what happens to your house, car, possessions, or other assets after you pass away. It also entails the question of who will take care of your minor children, if they are left without a parent, as well as your instructions for burial and other items.

If you fail to leave specific instructions, the state’s intestacy laws will apply at your death, meaning that the court will decide who gets what. There is no guarantee this will be in your best interest. Let’s look at the consequences of not writing your will:

  • If you prefer cremation or a traditional burial, your family may not know and decide based on their preferences or convenience.
  • Your properties will be managed by someone you do not necessarily trust, if you do not name an executor to your will.
  • Some of your loved ones may not get an inheritance if there is no will. State law may not carry out your intentions, and some people may be left out.
  • Your favorite charity may not receive donations. For those committed to leaving a legacy, your organization of choice should be listed in the will.
  • The court will assign guardians for your minor children, and social services will appoint a guardian. You can avoid this, by naming a trusted person in your will.

Aside from avoiding these consequences, estate planning can also save your family a lot of headaches and expense. A detailed will with your instructions will alleviate the stress and provide them with comfort, while they recover emotionally from their loss. Here are the top reasons why you need to plan these things:

  • You can avoid inheritance taxes and federal estate taxes with proper estate planning.
  • You can name who will care for you, if you are unable to make your own decisions because of illnesses, infirmity, or old age. With a power of attorney, you can name someone you trust to manage your finances.
  • If your minor children are orphaned, you can name someone you trust to be their guardian in your will.
  • Some family members are greedy, so you can exclude them from your will. With an estate plan created by an experienced estate planning attorney, you can ensure that the people you love will receive what you intend.

Estate planning is essential to securing a comfortable life for your loved ones. Work with an experienced estate planning attorney to set things up correctly.

Reference: The Big Easy Magazine (May 17, 2021) “Estate Planning Is Essential and Here’s Why”

 

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