How Can I Avoid a Retirement Home and Live at Home?

Staying at home requires planning. The sooner you begin, the more prepared you’ll be, even if you’re around at 102.

The Washington Post’s article, “Aging in place helps you to avoid a retirement community or nursing home,” explains that there’s plenty of work to do.

You might start by remodeling or retrofitting your home to suit senior-specific issues, such as decreased mobility or impaired eyesight (think replacing a bathtub with a walk-in shower or improved lighting). Some seniors add a first-floor bedroom and bathroom and an outdoor ramp onto their homes. Other changes can include wider doorways (the better to potentially accommodate a wheelchair or walker), a bathroom with grab bars and an easy-access shower.

This is known as universal design, which means building or remodeling a home to accommodate all ages and abilities. It can usually be implemented or planned by builders or contractors who are Certified Aging in Place Specialists (CAPS), an educational designation offered by the National Association of Home Builders.

Even if you can’t afford a major remodel, there are some simple changes you can do, like installing shower grab bars or improving interior and exterior lighting to avoid falls and other accidents. You can also secure throw rugs to the floor with special two-sided tape to prevent slips.

You can speak with an elder law attorney about health agencies, resources for financial assistance, elder abuse prevention, as well as estate planning, Medicare, Medicaid and other state programs.

Keep busy by taking yoga at the local rec center, business or computer classes at the public library, or even getting a roommate to help combat loneliness and keep feeling connected and emotionally healthy.

For dining, in addition to the community-based food delivery from Meals on Wheels, you can get restaurant food or groceries delivered to your home by services, such as Uber Eats, Caviar and Peapod.

There are also a number of meal prep companies—Blue Apron, Hello Fresh, and others—that make it easier to put a healthy meal on the table, without the need to journey to the grocery store.

Reference: Washington Post (July 1, 2019) “Aging in place helps you to avoid a retirement community or nursing home”

What Do I Need to Know About My Own Funeral Arrangements?

You’ve heard about death and taxes. While having a plan for your death may not be a big priority, creating a plan for your family when you pass is something everyone should do.

WHNT’s recent article, “How to plan for life after death,” says the first step is having that conversation with someone you trust. It may be a close friend, a family member or an attorney.

Next, think about some important considerations like what you want in terms of a funeral service, burial or cremation, if you want life insurance to pay your last expenses and how your estate should be handled.

The National Institute on Aging has created a comprehensive list of considerations for those who are facing end of life decisions. It’s also a great resource for caretakers.

This planning will may make the process easier for those you leave behind, especially if you work with an experienced estate planning attorney.

There are also some fundamental decisions that can also ease the financial burden on your loved ones.

The average North American traditional funeral costs between $7,000 and $10,000. This price range includes the services at the funeral home, burial in a cemetery and the installation of a headstone at the cemetery.

The National Funeral Directors Association reports that the median cost to move the remains of a loved one to a funeral home in the U.S. is $325. Embalming can run about $725, and the average cost of a vault in the United States is $1,395, as of 2017.

According to the 2018 NFDA Cremation & Burial Report, the 2018 cremation rate is estimated to be 53.5%, and the burial rate is projected to be 40.5%.

Forbes says that roughly 42% of people opt to be cremated because of the costs involved with a standard funeral in the United States.

Reference: WHNT (June 30, 2019) “How to plan for life after death”

Does Your Estate Plan Include Your Pets?

Estate planning helps to create a strategy for managing assets while we are living and their distribution when we pass away. That includes determining what happens to our tangible property as well as financial investments, retirement accounts, etc. An estate plan can also be used to protect the well-being of our beloved companion animals, says The Balance in the article “Estate Planning for Fido: How to Set Up a Pet Trust.”

Pet trusts were once thought of as something only for extremely wealthy or eccentric individuals, but today many ‘regular’ people use pet trusts to ensure that if they die before their pets, their pets will have a secure future.

Every state and the District of Columbia, except for Washington, now has laws governing the creation and use of pet trusts. Knowing how they work and what they can and cannot do will be helpful if you are considering having a pet trust made as part of your estate plan.

When you set up a trust, you are the “grantor.” You have the authority as creator of the trust to direct how you want the assets in the trust to be managed, for yourself and any beneficiaries of the trust. The same principal holds true for pet trusts. You set up the trust and name a trustee. The trustee oversees the money and any other assets placed in the trust for the pet’s benefit. Those funds are to be used to pay for the pet’s care and related expenses. These expenses can include:

  • Regular care by a veterinarian,
  • Emergency veterinarian care,
  • Grooming, and
  • Feeding and boarding costs.

A pet trust can also be used to provide directions for end of life care and treatment for pets, as well as burial or cremation arrangements you may want for your pet.

In most instances, the pet trust, once established, remains in place for the entire life span of the pet. Some states, however, place a time limit on how long a pet trust can continue. For animals with very long lives, like certain birds or horses, you’ll want to be sure the pet trust will be created to last for the entire life span of your pet. In several states, the limit is 21 years.

An estate planning attorney who has experience with pet trusts will know the laws of your state, so you’ll be able to create a pet trust for your pet.

Creating a pet trust is like creating any other type of trust. An estate planning attorney can help with drafting the documents, helping you select a trustee, and if you’re worried about your pet outliving the first trustee, naming any successor trustees.

Here are some things to consider when setting up your pet’s trust:

  • What’s your pet’s current standard of living and care?
  • What kind of care do you expect the pet’s new caregiver to offer?
  • Who do you want to be the pet’s caregiver, and who should be the successor caregivers?
  • How often should the caregiver report on the pet’s status to the trustee?
  • How long you expect the pet to live?
  • How likely your pet is to develop a serious illness?
  • How much money do you think your pet’s caregiver will need to cover all pet-related expenses?
  • What should happen to the money, if any remains in the pet trust, after the pet passes away?

The last item is important if you don’t want any funds to disappear. You might want to have the money split up to your beneficiaries to your will, or you may want to have it donated to charity. The pet trust needs to include a contingency plan for these scenarios.

Another point: think about when you want the pet trust to go into effect. You may not expect to become incapacitated, but these things do happen. Your pet trust can be designed to become effective if you become incapacitated.

Make sure the pet trust clearly identifies your pet so no one can abuse its terms and access trust funds fraudulently. One way to do this is to have your pet microchipped and record the chip number in the pet document. Also include photos of your pet and a physical description.

Be as specific as necessary when creating the document. If there are certain types of foods that you use, list them. If there are regular routines that your pet is comfortable with and that you’d like the caregiver to continue, then detail them. The more information you can provide, the more likely it will be that your pet will continue to live as they did when you were taking care of them.

Finally, make sure that your estate planning attorney, the trustee, and the pet’s designated caregiver all have a copy of your pet trust, so they are certain to follow your wishes.

Reference: The Balance (March 27, 2019) “Estate Planning for Fido: How to Set Up a Pet Trust”

The Next Wave in Retirement Planning: Digital and Cyber Assets

You’ve worked hard for decades, saving and planning for retirement. Don’t put it at risk by delaying having an estate plan created by a qualified estate planning attorney, advises The Press of Atlantic City in the article “Estate planning for your digital and cyber assets.” But here’s the thing: even when you have a comprehensive estate plan in place, meaning a last will and testament, a power of attorney, a health care power of attorney and the appropriate trusts, you’re not quite done.

That’s because today we have an entirely new type of property that must be dealt with in estate planning. Unlike tangible property that people have been handing down for centuries, this is a relatively new kind of property: digital assets. One of the problems with digital assets is that, unlike paper documents, your family members can’t simply sift through decades of physical records to find out what you own. The online world is endless, and if they don’t know what websites to look at, there’s simply no way that they can find your digital assets.

What is a digital asset? They include such things as:

  • Mobile devices, like cell phones, laptops, tablets
  • Email accounts—all of them
  • Social media profiles including Facebook, Instagram, Twitter, LinkedIn, etc.
  • Sites that contain music, photos, and other personal information
  • Your personal desktop
  • Online banking, investment accounts, cybercurrency
  • Online gaming accounts
  • Online bill paying, like utilities, EZ-Pass, and any automatic payments
  • Websites or blogs

You’ll want to let your executor know what you want to be done with your digital assets. Some platforms have the ability for you to express your wishes for your digital assets, like Facebook. What do you want to happen to your pages when you are gone? Do you want people to be able to see your pages, or to post on them? Would you want them to be taken down a month after you pass, or left up permanently?

You’ll need to list out all your digital assets, your username and your passwords, and provide a directive to specifically state what you want to happen to each website. Yes, it will take time and it may be tedious, but imagine how challenging it will be for your family members to try to track down all your digital assets. Speak with your estate planning attorney as to how to share this information—but don’t put it in a will, because your will becomes a public document if your estate goes through probate (which happens to most wills).

Just as you have taken the time to have an estate plan created, making sure to have a digital assets plan is a gift to your loved ones. With these details taken care of, your family will be able to focus their attention on taking care of each other, dealing with your estate, and going through the grief process. You’ll have spared them a lot of additional stress and expenses.

An estate planning attorney will be well worth the investment. You can be confident that your will is going to be prepared in accordance with the laws of your state, and that your family will be protected as you wished.

Reference: The Press of Atlantic City (July 4, 2019) “Estate planning for your digital and cyber assets”

You’ve Received an Inheritance. Now What?

Inheriting money puts a whole new spin on your outlook on money, says The Kansas City Star in its article “Coming into some money? Be wise with it.”

Should you pay off your debts first, if you have any? Make a list of your debt balances and their interest rates. If the interest rate is high, pay it off. If it’s low, you may be better off investing the funds.

Next, check on your emergency fund. If you don’t have three to six months’ worth of living expenses on hand, use your inheritance to ramp up that fund. Yes, you can use credit cards sometimes. However, having at least two months’ worth of living expenses in cash is worthwhile.

The third step is to contribute the most you can to a health savings account (HSA), if your employer does not contribute to it and if you have a qualifying health plan. That’s $3,500 if you are single, $7,000 for families and add $1,000, if you are over 55. This gets you a nice tax deduction and withdrawals are tax-free, as long as they are used for qualified medical expenses.

If you’re still working, and depending upon the size of the inheritance, it might be time to “tax-shift” your portfolio.

Let’s say you regularly contribute $3,000 to a 401(k). If you can, increase that amount by $22,000, to the maximum, if you’re 50 and older. Since your paycheck decreases, so does your tax. If your tax rate is currently 22%, you’ll only need to add $17,160 from your inherited account to reach the same spendable dollars. The tax-deferred account in your portfolio will grow faster, while the taxable account shrinks.

Think about whether to commingle funds with your significant other or not. Let’s say you and your spouse have a retirement portfolio. You both can spend it now, maybe on your house. The inheritance may also help you to retire earlier. If you save the inheritance, keeping it in a separate account with only your name on it, it remains your asset, in case of a divorce. Most states will consider this money a non-marital asset, and not subject to division between divorcing parties.

Consider using the inheritance as a way to avoiding tapping into retirement accounts. Withdrawals from IRAs are taxable. If you’re not worried about commingling funds or investment gains, then use the inherited account to minimize the tax losses from retirement accounts.

Most people don’t have enough saved to keep spending during retirement as they did while working. Skip the spending spree that often follows an inheritance and enjoy the money over an extended period of time.

Receiving an inheritance is one of the times when a review of your estate plan becomes a wise move. A new financial position may require more tax planning and more legacy planning.

Reference: The Kansas City Star (June 27, 2019) “Coming into some money? Be wise with it”

I Want to Make a Generous Gift but the Taxes?

That’s the short answer to the question, which is often asked in a roundabout manner: “How much am I allowed to gift?” There are more details in the complete answer, as reported in The Mercury’s article, “Can I gift more than $15,000?” You can gift as much as you wish, to whomever you wish, but you do have to know the tax implications.

A total of $10,000 used to be the annual exclusionary gift amount, which is now $15,000. However, that figure has less significance than it used to have.

In 2019, the annual exclusionary gift limit is $15,000. If you give away up to but no more than $15,000 in a calendar year to one or more individuals, whether that gift is in cash or any property of value, you don’t have to file the federal tax form, known as Form 709. If you gift more than that amount, you need to file that form.

However, the taxpayer for a gift tax form is the person who gives the gift, and not the person receiving the gift.

If you gift more than $15,000, it doesn’t necessarily mean that you have to pay a Federal gift tax. It’s actually unlikely, even if you have to file the form.

Here’s another point: it’s actually pretty easy to give away more than $15,000 and not have to exceed the annual exclusionary amount, and even technically being required to file a Form 709. How is that possible?

You are permitted to gift an unlimited amount to your spouse, as long as your spouse is an American citizen. The rules are different for non-citizens.

If you are married and want to help out a child who is also married with children, you and your spouse may gift $15,000 each to your son (there’s $30,000) and also to your son’s spouse (another $30,000) and to each of your son’s children, however many grandchildren you may have. If you want to compound your gifting, you can make that same gift every year.

The federal estate and gift tax are “unified.” This allows you to give away any property above the annual exclusionary gift amount or for your heirs to inherit a total of $11.4 million currently, without paying gift or estate taxes. Unless your combined lifetime estate giveaways are subject to gift tax and your estate on death is valued at more than $11.4 million, there’s no need to worry about that gift tax.

There are other ways to be generous. If you pay for someone else’s medical care (and pay directly to the medical care provider, not to the person), or for someone else’s college tuition (pay directly to the college and not to the person), you can give an unlimited amount to that person, without having to file a gift tax form or making a gift tax payment.

Charitable gifts are also except from the reporting requirement, providing that no interest in the gifted assets is retained by the person gifting.

There are several reasons why you might want to file a gift tax return. One might be to keep track of the value of the gift at the time it was given. If the asset has increased in value since the purchase, both you and the party receiving it may need to track its value, as of the date of the gift. This is the concept known as basis. If the person sells the gift, this will be necessary to determine federal taxes regarding profit or losses.

An experienced estate planning attorney will be able to help determine how gifting can fit in with your overall estate plan. Every situation is unique, and you want to be sure that your gifting strategy fits in with creating a legacy and tax planning.

Reference: The Mercury (June 26, 2019) “Can I gift more than $15,000?”

Planning for the Impact of Medicaid

One of the most complicated and fear-inducing aspects of Medicaid is the financial eligibility. The rules for the cost of long-term care are complicated and can be difficult to understand. This is especially true when the Medicaid applicant is married, reports Delco Times in the article “Medicaid–Protecting Assets for a Spouse.”

Generally speaking, to be eligible for Medicaid long-term care, the applicant may not have more than $2,400 in countable assets in their name, if their gross monthly income is $2,313 or more. That’s the 2019 income limit.

There are Federal laws that mandate certain protections for a spouse, so they do not become impoverished when their spouse enters a nursing home and applies for Medicaid. This is where advance planning with an experienced elder law attorney is needed. The spouse of a Medicaid recipient living in a nursing home, who is referred to as the Community Spouse, is permitted to keep as much as $126,420 and a minimum of $25,284, known as the “Community Spouse Resource Allowance,” without putting the Medicaid eligibility of the spouse who needs long-term care at risk.

Determining the Community Spouse Resource Allowance requires totaling the countable assets of both the community spouse and the spouse in the long-term care facility, as of the date of admission to the nursing home. The date of admission is referred to as the “snapshot” date. The community spouse is also permitted to keep one-half of the couple’s total countable assets up to a maximum of $126,420 in 2019 and no less than the minimum of $25,284. The rest of the assets must be spent down.

Countable assets for Medicaid include all belongings. However, there are a few exceptions. These are personal possessions, including jewelry, clothing and furniture, one car, the applicant’s principal residence (if the equity in the home does not exceed $585,500 in 2019) and assets that are considered inaccessible, such as a spouse’s retirement accounts.

Unless an asset is specifically excluded, it is countable.

There are also Federal rules regarding how much the spouse is permitted to earn. This varies by state. In Pennsylvania, the spouse is permitted to keep all of their own income, regardless of the amount.

The rules regarding requests for additional income are also very complicated, so an elder law attorney’s help will be needed to ensure that the spouse’s income aligns with their state’s requirements.

These are complicated matters, and not easily navigated. Talk with an experienced elder law estate planning attorney to help plan in advance, if possible. There are many different strategies for Medicaid applications, and they are best handled with experienced professional help.

Reference: Delco Times (June 26, 2019) “Medicaid–Protecting Assets for a Spouse”

Be Aware of These Myths about Social Security

Despite everything written about filing for benefits as late as possible, more than half of seniors apply for Social Security before they reach full retirement age. It is now 66 and will rise to 67 for people born in 1960 and later. More than a third of all Americans apply as soon as they possibly can—at age 62. Only one in twenty-five applicants puts off filing to age 70, when monthly benefits max out, says the Washington Post in the article advising readers “Don’t believe these Social Security myths.”

Some people have no choice and must take their benefits early, because they’ve lost their job and have no savings. Others have better options, but they aren’t aware of them. That’s because of the many myths about Social Security. A survey found that while 77% of Americans thought they were pretty smart about Social Security, 95% couldn’t answer eight basic questions about the program.

Let’s look at these myths.

It doesn’t matter when I take Social Security. Benefits increase by about 7% every year from age 62  to your full retirement age, and then by 8% each year between full retirement age and 70. This is a planned adjustment to ensure that people who opt for a larger check for a shorter period don’t receive more than those who file earlier and receive smaller checks. It’s better to delay, both for the larger check and the benefits that the surviving spouse receives. People who live longer can run out of savings, so having a larger check in your 90s could make a huge difference.

If I don’t expect to live a long time, I should claim benefits early. Most of us underestimate our life span. A 65-year old man today can expect to live to 84, and a 65-year old woman can expect to live to 86.5. Life expectancies are even longer for those in their mid-50s. However, here’s the thing: even if one spouse doesn’t live as long, by taking Social Security earlier, their spouse will have a smaller benefit. Married couples lose one of their checks when the first spouse dies, causing a big drop in income. The survivor receives the larger of the two checks the couple was receiving. Therefore, the higher earner in a couple, whose check will be larger, should delay taking benefits, if at all possible, to benefit the surviving spouse.

I can claim benefits early and invest the money to come out ahead. No investment today offers a guaranteed return as high, as what can be obtained from delaying benefits. You’d have to take a lot of risk to get close to the 7% or 8% guaranteed by Social Security.

As soon as I stop working, I have to file for Social Security benefits. Not true. You don’t have to file for Social Security benefits until you want to. Even delaying four years, from 62 to 66, can translate into a sustainable 33% increase in your standard of living.

I better apply before Social Security runs out of money and closes down. This myth becomes more widespread every year. If Congress doesn’t act, which is unlikely, by 2035, the system will still be able to make payments, although they may be curtailed by 20%. Eighty percent of your Social Security check is not zero. It’s also more than likely that Congress will address Social Security fixes.

Reference: Washington Post (June 10, 2019) “Don’t believe these Social Security myths”

A Will, Power of Attorney and Health Care Power of Attorney: Three Documents Everyone Should Have

These three documents combined allow you to designate who you want to be responsible for your well- being, if you are unable to communicate to others on your own behalf and name who you want to receive your property. Having a will, power of attorney and health care power of attorney are the foundation of an estate plan and peace of mind, says the article “Simple steps to peace of mind” from the Traverse City Record Eagle.

If you die without a will, your state has a plan in place for you. However, you, or more correctly, your family, probably won’t like it. Your assets will be distributed according to the laws of inheritance, and people who you may not know or haven’t spoken to in years may end up inheriting your estate.

If your fate is to become incapacitated and you don’t have an estate plan, your family faces an entirely new set of challenges. Here’s what happened to one family:

A son contacted the financial advisor who had worked with the family for many years. He asked if the advisor had a power of attorney for his father. His mother had passed away two years ago, and his father had Alzheimer’s and wasn’t able to communicate or make decisions on his own behalf.

Five years ago, the financial advisor had recommended an estate planning attorney to the couple. The son called the attorney’s office and learned that his parents did make an appointment and met with the attorney about having these three documents created. However, they never moved forward with an estate plan.

The son had tried to talk with his parents over the years, but his father refused to discuss anything.

The son now had to hire that very same attorney to represent him in front of the probate court to be appointed as his father’s guardian and conservator. The son was appointed, but the court could just have easily appointed a complete stranger to these roles.

The son now has the power to help his father, but he will also have to report to the probate court every year to prove that his father’s well-being and finances are being handled properly. Having a will, power of attorney and medical power of attorney would have made this situation much easier for the family.

Guardianship is concerned with the person and his or her well-being. Conservatorship means a person has control over an individual’s financial matters and can make all decisions about property and assets.

There is a key difference between powers of attorney and conservatorship and guardianship. The person gets to name who they wish to have power of attorney. It’s someone who knows them, who they trust and they make the decision. With conservator and guardianship, it’s possible that someone you don’t know and who doesn’t know your family, holds all your legal rights.

A far better alternative is simply to meet with an estate planning attorney and have him create these three documents and whatever planning tools your situation calls for. Start by giving some thought to who you would want to be in charge of your life and your money, if you should become unable to manage your life by yourself. Then consider who you would want to have your various assets when you die. Take your notes with you to a meeting with an estate planning attorney, who will know what documents you need. Make sure to complete the process: signing all the completed documents, funding any trusts, retitling any accounts and finally, making sure your family knows where your documents are. This is a road to peace of mind, for you and your family.

Reference: Traverse City Record Eagle (June 23, 2019) “Simple steps to peace of mind”

Estate Planning for Digital Assets

Every password-protected account that you own is a digital asset. They should not disappear into a void when you pass. They need to be protected, just as much, and maybe even more, than tangible assets. They can be stolen by cyber-criminals, who can loot bank accounts, retirement funds and more. You can direct that they be transferred, preserved or destroyed, says the Valdosta Daily Times in the article “Preparing an estate strategy for digital assets.”

Digital assets include information on phones and computers, content uploaded to social media sites like Facebook, Instagram and others, creative/intellectual content in digital property and records from online communications, including emails and texts.

Do these accounts really have any value? Yes—according to security software provider McAfee, the average American’s digital assets are worth about $55,000.

Estate strategies for digital assets require an awareness of new and changing laws about digital assets. Almost every state has now passed some version of the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA), which has defined a path for the future of digital accounts, when the owner passes. RUFADAA has set a hierarchical structure for the transfer of digital assets.

First, if the service provider has a means of permitting the transfer of the asset to a designated party of the original asset owner’s choice, that takes priority. Gmail and Facebook have a means of creating a directive to state the owner’s wishes.

If no such directives are on the website, then the instructions denoted in traditional estate documents must be followed, assuming that those documents are prepared properly.

If none of that is in place, then the service provider’s Terms of Service Agreement (TOSA) takes priority.  If the providers TOSA says that the account is a nontransferable lifetime lease, its ownership may not be transferred to another person. However, as a result of RUFADAA, the owner has the right to appoint a fiduciary to access, manage or close out an online account. The power may be exercised, if you are dead or if you are incapacitated.

However—you must name this fiduciary and grant the legal power to an individual through your will, power of attorney or trust agreement. Otherwise, no such authority can be given.

What else should you do? Leave a digital road map for your executor: accounts, passwords and username. Note that if the platforms use facial recognition or other biometric markers, they may not be able to gain access to the accounts. Check with social media and merchant websites to see what policies are for transferring or maintaining digital assets, when the owner dies. You should also look at reward points and credits to see how they can be transferred, and find out how pending transactions, like automatic orders, can be handled.

Consider your executor. Are they comfortable with the digital world, or a technophobe? If they may not be able to manage the digital assets, consider naming another person to handle this task. Your estate planning attorney will be able to include them in your estate planning documents.

Reference: Valdosta Daily Times (May 26, 2019) “Preparing an estate strategy for digital assets”