Long Term Care and Longevity: Will We Get Overwhelmed?

Most people know about the potential impact of costs tied to long-term care, but they haven’t taken time to protect themselves.

Long-term care costs could become overwhelming as a result of longevity. The number of individuals turning age 65 and older is set to double by 2060, by the time that today’s Millennials start to turn 65. They will also make up 24% of the population as compared with 15% today. That means that 1 in 4 individuals will be in an older age category at high risk of needing long-term care.  long term care costs

This is the result of data collected by a study referred to as Aging in the United States. The number of older individuals in the U.S. right now places a major burden on breadwinners in their productive years, but by 2030, there will only be approximately 2.8 adults of working age for every individual age 65 and older. This is a decrease from 5 in 2000.

Today’s working age citizens will be hit by a double whammy trying to build their own economic future and the economy. Data from aging parents shows that approximately 3 out of every 4 aging Americans will need some type of long-term care after age 65. The odds of a financial impact for any working couple with two sets of parents is extremely high if any of those parents does not have the resources for their own care. Long-term care services can be extremely expensive, costing between $100,000 or $200,000 per year, depending on the type of claim services and the location.

When multiple family members involved need long-term care, the cost can become extremely prohibitive, but these financial impacts extend beyond the cost of care. It can also lead to interrupted employment if one partner has to take time off work in order to care for an aging parent.

Five Things You Can Accomplish with Estate Planning for Your Children

 

Your children are probably some of the most important people in your life. Parents spend a lot of time worrying about and thinking about their children’s future.

Spending time with your children over the summer holidays can reignite concerns about what will happen to them after you pass away. This is a natural inclination that may even prompt you to schedule a meeting with an estate planning attorney. Although estate planning certainly has individual benefits for the person putting together the materials, it also has many advantages associated with your children or your grandchildren. There are five primary ways that properly structuring your estate plan and consulting with a knowledgeable attorney can assist you. These include:

  • Protecting benefits for a disabled child.
  • Protecting the inheritance that you leave behind for children.
  • Ensuring future vacations at the family vacation home.
  • Assisting adult children with health care decisions.
  • Providing for someone to step in and care for your minor children in the event that you pass away.

All of these crucial issues can be addressed typically in one or a series of meetings with the right estate planning lawyer. Many people put off the prospect of estate planning because they assume that they do not need it or that it is too time consuming or expensive. However, scheduling a consultation now will give you an overview of all of the different things that can be accomplished with the right lawyer.

DIY Dangers

You know you need to set up a will and perhaps a trust, too. A Google search reveals a broad range of websites that promise to help you do just that either for free or a minimal cost. Pointing and clicking, though, is a dangerous approach to take with your estate planning. 

Using an online site to put together estate planning documents like a power of attorney, a trust or will is appealing if you think that you might not be able to afford to shell out a few hundred dollars for an estate planning lawyer, or in situations in which you need the paperwork settled quickly. However, there can be major risks associated with doing this, particularly if you have an issue that requires legal oversight like caring for a special needs child to protect him or her being cut off from government benefits, or if your financial situation is complex.

If you have an uncomplicated estate, it’s still a good idea to schedule a consultation with an experienced estate planning attorney because you can get further insight about how relevant laws and regulations affect you as well as further strategies that can help to protect you and carry out your wishes. With so many things that must be accomplished and even the most basic of estate planning documents, it can be a mistake to assume that a generic form is capable of capturing all of the information you will need to have your wishes carried out once you pass away.

Far too many people never even realize the negative impacts of failing to take action because their family members will be the ones sorting out conflicts and unresolved issues after the loved one passes away. Do your family a favor and schedule a consultation with an experienced estate planning attorney so that you can learn more about the benefits provided by estate planning.

Five Things You Need to Know About Inherited Retirement Accounts

Almost everyone has some type of retirement account, whether it’s a pension, IRA, or 401(k). So, it’s important to plan ahead for your estate purposes. One of the first things to know about a retirement account is that your beneficiaries will most likely owe taxes on the retirement accounts passed down to them. IRAs and future planning

Assets like real estate, non-retirement investment accounts, vehicles and life insurance are not counted as income when they are inherited. However, retirement accounts are classified as income in respect of a decedent. The second thing to know is that not all retirement accounts are treated in a similar fashion. A beneficiary who left behind an employer sponsored plan like a pension or a 401(k) will be subjected to more requirements and limitations than IRAs.

Many people will name their spouse as their primary beneficiary, but the third thing to know about retirement accounts is that it doesn’t provide any level of protection or preservation for the inherited accounts. Make sure that your broader estate planning objectives match the beneficiary designations.

The fourth thing to know about retirement accounts is that there is an increased level of flexibility and protection afforded by passing a retirement account to your beneficiaries via a trust. However, retirement trusts have to be drafted appropriately by an experienced estate planning attorney because of the income tax treatment of inherited retirement accounts. Bear in mind that without significant planning, the funds could be subject to the claim of any beneficiary’s judgment, creditors, or bankruptcy. Consulting with an experienced estate planning attorney is one way to avoid these negative consequences.

The Great Debate Over Medicaid

Many people hope that they will never be disabled or poor, however, the biggest myth that many people are countering today that they will be able to pay for themselves in their old age. A majority of people are actually not able to do this. One in three individuals who turn 65 will end up in a nursing home at some point over the course of their lives and research from the Kaiser Family Foundation shows that 62% of them cannot pay the bill on their own. sparks fly in the Medicaid debate

When you run out of assets, Medicaid steps in to pay. The Medicaid program could have hundreds of billions of dollars less to spend, however, if the current Medicaid debate in Washington leads to significant cuts. The average annual cost of a nursing home for a semi-private room is $82,000, according to Genworth Financial. Most people cannot afford to pay that amount and certainly not for a long period of time, particularly if they have already spent a good portion of their retirement for the 10 or 20 years prior. If a spouse has already needed years of expensive care, then the other partner is even more vulnerable.

Talking to an experienced estate planning lawyer about your options for planning for Medicaid is extremely important. It is a responsibility to do your planning and it’s not unethical to look ahead towards how to qualify for Medicaid legally. Medicaid is a complicated program fraught with rules and regulations, which is why you need an estate planning or elder law attorney who knows the landscape and can help walk you through these issues up front.

Should You Use a Fiduciary for A Trustee?

 

A fiduciary is someone with a moral as well as a legal obligation to put their client’s interests first. Not every adviser would consider themselves to be a fiduciary and this could leave that person open to conflicts of interest. A new fiduciary role, however, requires that all advisors who work with retirement plans or provide any type of retirement and planning advice consider themselves fiduciaries, but other financial advisors may or may not act as strictly as fiduciaries. The best way to know for sure is to ask to an advisor. 

Make sure that when selecting a trustee, you choose someone with the right kind of knowledge. Your trustee will most likely have to make serious decisions about how to manage the assets within your trust and they will need to have the appropriate background to make educated decisions. Ideally, they will have both an investment and a tax background and other types of experience may be required based on the types of assets within your estate.

If you have a small business as part of your estate, for example, you will want a trustee with business management experience. Consulting with a knowledgeable attorney to discuss the various benefits of moving forward with choosing a trustee is wise. Make sure that the individual that you select is well aware of his or her responsibilities, is capable of carrying them out and is comfortable doing so.

Thinking About Using Your IRA to Pay for A College Student’s Tuition? Make Sure You Evaluate Your Options First

Approaching the overwhelming cost of college is a challenge that many parents are thinking about this summer as they are preparing to send off their new graduates to college. With the cost of graduate school as well as college on the rise, many prospective students and parents are looking towards retirement accounts as an effective way to pay for school. college planning MS

According to a recent study conducted by Sally May & IPSOS, up to 6% of parents withdrew from their retirement savings such as an IRA or a 401(k) to help pay for a child’s college. Since the price of college has gone up, it may the case that parents do not have enough set aside to pay for college. There are some considerations to evaluate before using an IRA to pay for school:

  •       Withdrawals prior to age 59 and a half can lead to a 10% penalty except in situations like putting down a payment on a first home or higher education expenses. The expenses have to be for a child, grandchild, a spouse or yourself. When withdrawing from an IRA, a student or a parent can pay for tuition, books or other qualified education expenses with no penalty.
  •       There are major differences between using a traditional IRA and a Roth IRA for higher education costs. The best approach is to use a Roth IRA to pull out without a 10% early withdrawal penalty.
  •       You can roll a 401(k) into an IRA to pay for educational expenses.

 

A withdrawal from an IRA can impact financial aid. Students who apply for need based financial aid have to report asset information and income on the free application for federal student aid. Money inside a retirement account such as a traditional or a Roth IRA are assets that are exempted from being evaluated on the FAFSA, but withdrawing funds from an IRA account does count as income over the following years.

Does It Make Sense to Move College Savings Out of A UTMA Account and Into A 529 Plan?

 

Many people who have been saving for their children’s college education over the past couple of decades since the children were born will have set up a Uniform Transfer to Minor Act. Some financial aid documents may illustrate that it could be beneficial for the assets to instead be in a section 529 plan rather than in a custodial UTMA account. Student assets are assessed more heavily for the purposes of determining financial aid from the government perspective. 529 college savings

Many of the assets owned by the parent are sheltered on the FAFSA. For example, life insurance policies, the net worth on the principle place of residence, small businesses owned and controlled by the family and life insurance policies, all do not have to be reported on the Free Application for Federal Student Aid. An age-based asset protection allowance also allows the parents to shelter up to $50,000 in assets. Student assets, however, do not have an asset protection allowance and can be assessed at the flat rate of 20%. Each $10,000 that has been set aside in the student’s name will increase the expected family contribution by approximately $2000.

On the FAFSA, a student is responsible for reporting the custodial UTMA account. A 529 college savings plan, however, is reported as a parent’s asset on the FAFSA, even if the account has the student’s name on it and it is owned by the student. The favorable treatment of 529 college plans became effective relatively recently in 2009. You may be eligible to transfer money from a UTMA or other custodial account to a 529 savings plan.

You will need to set up a custodial 529 college savings plan account since the money will be transferred from a UTMA account to begin with. When the child reaches the age of trust termination, which is usually 18 or 21 depending on the state, he or she officially becomes the owner of the section 529 plan. Talking to an experienced estate planning lawyer is strongly recommended if you are interested in these plans.

The Benefits of a Revocable Living Trust

Many estate planning tools provide numerous benefits for a broad range of individuals. Believing that estate planning is only for the wealthy or only for those approaching retirement and beyond can be a big mistake. One of the most flexible and powerful tools associated with estate planning is known as the revocable living trust. It should always be set up by an experienced attorney.  

The basic purpose of any trust is to allow one responsible individual or a firm to manage the assets of someone else. The settlor may also be referred to as the grantor, donor or trustor. This is the person with the assets. The trustee then becomes responsible for those assets and acts on behalf of those receiving the assets. If you don’t want someone knowing the full details behind your assets and your worth, a trust can help to keep this confidential. When a settlor passes away, you can structure it such that all of your assets will transfer over to the trust. 

This is why all assets should be in the name of the trust while the settlor is still alive. However, you might use an additional tool called a pour over will, that means these will eventually end up in the trust. A revocable living trust provides a great deal of flexibility because it can be changed over the course of your life.

This is in direct contrast to an irrevocable living trust, which is established once and cannot be changed over the course of your life. Knowing the different tools available to you and how to use a revocable living trust goes a long way in explaining how your future beneficiary will be able to receive assets. Talk to an experienced estate planning lawyer today to learn more.

Is Estate Planning Only for Your Finances?

Many people think that financial benefits are the only ones obtained by planning. Although the most obvious benefits of your estate plan are financial in nature, there are many other nonfinancial benefits as well. Identifying a guardian to serve for pets or for children or even protecting non-traditional assets like a stamp or gun collection can additionally be accomplished through the estate planning process. Talking things through with a lawyer can help you uncover all the advantages of a complete estate planning process.

Another major reason that people schedule a consultation with an estate planning attorney to begin with is because of a concern over privacy. Establishing a trust gives a layer of privacy to someone who wants to accomplish estate planning without it becoming a matter of public record. An estate also has one other major non-financial benefit and that is peace of mind. All of the numerous what-if scenarios that through the mind of a person putting together an estate can be overwhelming, but sitting down and discussing these directly with a knowledgeable attorney can help to clarify your position and articulate your goals clearly in valid legal documents. The right attorney can make a big difference when contemplating the financial and non-financial benefits of estate planning. Do not hesitate to schedule a consultation with a Mississippi estate planning lawyer today