Orlando Estate & Elder Law

4% Withdrawal Rule Needs An Update

“There is a longstanding 4% rule of thumb that was developed in the mid-1990s, outlining how much a person could safely withdraw from retirement savings each year and still have a nest egg to last a lifetime (aka 30 years).”

Scratch that rule advisors are now saying, because there are too many other factors to consider. The old 4% rule, reports Forbes in the article “Here’s How to Refresh Your Retirement: The 4% Rule of Thumb,” doesn’t work anymore, in light of increasingly high healthcare costs, jobs that can be done well into one’s later years and a longer life expectancy.

It is now thought that the 4% rule is a decent base line.  However, you’ll need to go deeper into the details to plan for your retirement. Your spending also has a lot to do with what you expect from retirement and how expensive a lifestyle you choose.

One key factor today is tax-deferred investing. The importance of being taxed at the highest rate versus paying a lower tax rate can be misleading. Many people defer taxes on their investments, because they don’t want to pay 30% to 40% income taxes when they could defer to a higher bracket, if tax laws change.

Some are considering investment in single family rental properties. If you buy a rental house with a small capital investment, the house will ideally appreciate over time on a tax-deferred basis. Owners benefit by depreciating expenses on their tax returns. The single-family rental home can be paid off in 15 years to 20 years and create income for the owner—predictable income that could also increase from year to year.

Another strategy is to create an investment portfolio that combines diversified stocks and high-quality fixed annuities, paired with a systematic withdrawal plan and a built-in buffer strategy to reduce risk in the case of severe stock market swings.

One advisor noted that if a retiree today relies on a traditional 60/40 stock/bond portfolio, they could be looking at a financial disaster. The yields on bonds are at historic lows and a 4% withdrawal is just asking for trouble.

An effective tax reduction strategy has the potential to raise a retiree’s safe withdrawal rate even higher.

The best advice is to have a plan in place that works for the lifestyle that you and your spouse want and being prepared to adjust, if necessary. Your plan may include working until you both reach full retirement age, working part time during retirement, moving to a location that is more affordable or aging in place.

Your plan should include putting your estate plan in place, by working with an experienced estate planning attorney. At the very least, you’ll need a will, power of attorney and a medical directive. Depending upon your situation, you may need more complex planning tools.

For more information about estate planning in Orlando, FL (and throughout the rest of Central Florida), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.

Reference: Forbes (Aug. 7, 2018) “Here’s How to Refresh Your Retirement: The 4% Rule of Thumb”

Find a Good Match for Your Estate Plan

“Searching for a lawyer who can help you put together a good estate plan, may seem like a daunting task.  However, with a little help, you should be able to find several qualified lawyers to choose from.”

Finding an estate planning attorney who can help you create an estate plan that works for your family, is an important first step in creating an estate plan. You’ll want someone you are comfortable with, who is respected by other professionals and will be able to help your loved ones during emotional times. An article from The Balance, “Tips for Finding an Estate Planning Attorney,” offers some useful pointers.

Ask your accountant. Many estate planning attorneys work closely with accountants to address tax issues. Your accountant should know a few estate planning attorneys that they work on a regular basis. They are likely to need to coordinate some issues, so a good working relationship between the two is a plus.

Ask another attorney. If you have retained attorneys in setting up a business, buying a home or reviewing a contract, ask that attorney who they use for estate planning. You should also ask about client referrals. Attorneys in other practice areas recognize that their knowledge about business law or real estate law, does not give them the same training and skill set of an estate planning attorney.

Ask your financial advisor. Many financial advisors consider estate planning a critical part of their client’s overall financial plan. Most have a handful of estate planning attorneys for referral. If your financial advisor has not asked if you have a will, they are missing an important task of their job—looking out for all aspects of your life, not just your investments. Go ahead and ask the financial advisor who prepared their own estate plan.

Contact the local probate court. This isn’t for everyone, especially if you live in a large city. However, in a smaller community, the town clerk knows most of the attorneys and those that are well-liked by judges. Practicing in a small town is different than in a big city.  Therefore, attorneys who work well with others, may be more effective in certain matters.

Visit the attorney’s website. You want to make sure they have the right credentials, that they focus in estate planning and that they share your values.

Maybe the best tip of all: Make an appointment. When you sit down with an estate planning attorney and have a face-to-face conversation, you’ll really know if they are the right fit for you and your family.

For more information about estate planning in Orlando, FL (and throughout the rest of Central Florida), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.

Resource: The Balance (July 31, 2018) “Tips for Finding an Estate Planning Attorney”

When The Worst Case Scenario Comes True

“A bad medical diagnosis can make a person realize that he suddenly has far less time to get his affairs in order. What’s the best way to leave assets to your heirs? Should you pay off your mortgage?”

Receiving a terrifying medical diagnosis of a fatal illness can leave you and your loved ones stunned and afraid. Once the initial shock has subsided and you have put the emotional and medical resources in place, it will be necessary to address the legal aspects according to a recent article from CNBC titled “When end-of-life planning is suddenly a lot closer than you thought.”

Start by assembling all your financial information in one place. An old-school loose-leaf binder may be easiest for your family, depending on their comfort level with technology. If your family is accustomed to online portals where information is stored, consider the emotional state of shock they will be in. Make it as easy and accessible as possible for you and them.

The information should include your Social Security benefits and pension information. There may be survivor benefits that your family will need to know about.

Include the prior year’s tax returns and a note as to where your other tax returns can be found and contact information for your CPA if you use one.

If you don’t have a will, power of attorney, healthcare surrogate designation or any estate planning documents in place,  it is now the time to make an appointment with an estate planning attorney.

Another task will be to designate beneficiaries for any financial accounts and insurance policies. Depending on your brokerage house, you may be able to attach a transfer-on-death instruction to your non-retirement accounts.

You can do the same thing with real estate in 27 states. Unfortunately, Florida is not one of the states, but there may be alternatives to use.

Next, make a list of your liabilities. It should include your mortgage, car loans and credit card debt.

Create a contact list for your family that includes your estate planning attorney, CPA, financial advisor and insurance agent.

Should you pay off your mortgage? This might not always be the best move. Consider the funds available, your tax bracket and the current mortgage. Do you want a family member to be able to live in the house? Your estate planning attorney will be able to run through different scenarios and strategies.

Write a legacy letter. This is not a legal document but a letter that will express your intentions for your will and your wishes for personal property. If it’s not too hard, it is also a place where you can share your wishes for your funeral arrangements.

For more information about estate planning in Orlando, FL (and throughout the rest of Central Florida), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.

Reference: CNBC (July 18, 2018) “When end-of-life planning is suddenly a lot closer than you thought.”

What To Do After the Funeral

When a close family member passes away, there are certain steps that you should take, as soon as you possibly can.

Death can be overwhelming for the family of the deceased. On top of the grieving process itself, there are many other things which families have to deal with. There are obvious things that need to be done, such as planning a memorial and burial or cremation.

There are also legal issues with the estate that also need to be resolved and the sooner the better. Getting a handle on those legal things can be difficult.

Taking a few steps can make things much easier, as Kiplinger discussed in "5 Things to Do the Moment a Loved One Passes Away"

These steps include:

• Making sure that someone in the family has access to the home of the deceased. A walk through of the home should be done to make sure that anything of value is secure and to look for all financial and legal documents.
• Closing all financial accounts. Make sure that banks and credit card companies know someone has passed away. Provide them with any documentation they need to put holds on the accounts. If no one will be living in the home, make sure unnecessary services such as cable and phone are stopped.
• If you are going to be the executor (personal representative) of the estate, get a general idea of the estate's finances by looking at any tax documents and financial statements.
• Meeting with an accountant and an estate attorney to learn what you need to do and consider whether you need to hire them to assist you.
• Talking to other family members to try and reach agreements about how the estate should be handled and by whom. This will help avoid fights later.

Reference: Kiplinger (April 17, 2018) "5 Things to Do the Moment a Loved One Passes Away"

Helping Your Widow

It is unlikely that you and your spouse will pass away at the same time, so it is important to prepare for what will happen when one of you passes first, to make sure the other has what he or she will need.

One of the last things many elderly couples would prefer to think about is what will happen when one of them outlives the other. However, that will most likely be the case for all couples.

This can be a big issue to deal with emotionally. When it happens, the surviving spouse will not want to have to worry about finances. USA Today discusses this issue in "How to prepare financially for being a widow/widower."

Here are some practical steps to take now, so you will be prepared to be a surviving spouse:

• The most important step is taking the time to talk and to make sure that both spouses are well-informed about the finances and how to handle them.
• Run through scenarios so you will both know what will happen when either spouse passes away, taking into consideration what the surviving spouse's income and living expenses will be.
• If you can afford to do so, then delaying Social Security benefits as long as possible will give a surviving spouse higher benefits.
• Make sure that all beneficiary designations on retirement plans, bank accounts and insurance policies are correct.
• It may be necessary to hire a financial planner who can help the surviving spouse.
• Visit an estate planning attorney and make sure that your estate plan is up to date and adequately protects the surviving spouse.
• It might be a good idea to move into a different home that will be more easily manageable for a surviving spouse.

For more information about estate planning in Orlando, FL (and throughout the rest of Central Florida), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.

Reference: USA Today (Jan. 19, 2018) "How to prepare financially for being a widow/widower."

Florida Says No Contest - But Do You?

Before deciding whether or not to launch a legal challenge to a will or trust, it is important that you see an estate attorney to learn about no contest clause laws in your state.

Many wills and trusts today have what is known as a “no contest” clause. Including such a clause is standard procedure to help fend off any legal challenges to the contents of a will or trust.

What these clauses say is that anyone who receives an inheritance from a will or who is a beneficiary of a trust receives nothing, if they challenge the validity of something in the will or trust. They effectively disinherit anyone who is not satisfied with the assets that they receive.

Even no contest clauses are not bulletproof as the Wills, Trusts & Estates Prof Blog discusses in "Take It or Leave It: The Perilous Decision of Whether to Violate a No Contest Clause."

Sometimes when a person challenges a no contest clause and loses the challenge, courts will refuse to enforce the clause. Sometimes when a person challenges a no contest clause and wins the challenge, the court will enforce the clause anyway.

The difference between the two extremes is a matter of individual state law and what exactly is being challenged.

There are different rules in every state.   Florida does not allow no contest clauses.  But what if the Will was drafted elsewhere?

Anyone who wants to challenge the contents of a will or trust needs to make sure that they speak to an experienced estate attorney in the appropriate state to get good advice about what challenges are worth making and what challenges should be avoided at all costs.

For more information about estate planning in Orlando, FL (and throughout the rest of Central Florida), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.

Reference: Wills, Trusts & Estates Prof Blog (Nov. 24, 2017) "Take It or Leave It: The Perilous Decision of Whether to Violate a No Contest Clause."

Belgrade's Approach to Pet Issues

Lacking an official place to bury their beloved pets, the citizens of Belgrade, Serbia have turned to clandestine methods. They have created hidden pet cemeteries in the city's parks.

It used to be that cities did not worry too much about what to do with residents' deceased pets. Most people were content to dispose of the remains through cremation or to allow the local authorities to dispose of the remains however they wanted.

Many people today treat their pets like they were members of their families. They often leave their pets inheritances and, in some cases, create elaborate trusts for the care of their pets.

Many people also want to bury their pets more formally in a traditional burial site.

Not all cities around the world have places to bury pets. That can cause problems.

As Fox News reports, this is the case in Belgrade, Serbia. The article is titled "Improvised pet graveyards hidden in Belgrade parks."

Belgrade has promised its citizens a pet cemetery for a decade, yet the project to actually build one is still in the planning phase.

Not wanting to wait for the city to create a place for their pets, many residents have taken to burying their pets in the city's parks in hidden graveyards.

The city does offer other ways to dispose of animal remains through official channels.  However, that is not good enough for people who want a place they can go to visit their beloved former pets.

What does this show? The pet human bond is stronger than ever.

If you feel strongly about what happens to your pets after you pass away, then visit an estate planning attorney to see what can be done to make sure that your pet is taken care of.

For more information about estate planning in Orlando, FL (and throughout the rest of Central Florida), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.

Reference: Fox News (Oct. 26, 2017) "Improvised pet graveyards hidden in Belgrade parks."

Mom's Last Visit to Disney

Some people request that their ashes be spread at places that have sentimental value for them. However, that can be a problem when the request is to spread those ashes in an inappropriate place, such as Disneyland.

The Disney theme parks receive thousands of visitors every year. It is not uncommon for those visitors to do the same things over and over again.

To avoid alarming any guests, Disney staff use code words to describe common occurrences.

For example, if someone vomits on a ride, Disney staff refer to it as a "protein spill." A particularly rude or difficult visitor is referred to as a "treasured guest."

It is not surprising that Disney would have developed special code words to refer to what are probably very common occurrences.

However, sometimes Disney has code words for are a bit more surprising, as The Sun reports in "Be Our Guest The secret code Disney theme park staff use to describe the rudest visitors -- so have YOU been called it?"

A "white powder event" might sound like staff has discovered certain illegal drugs or potentially dangerous chemical or biological substances.

No.

It is used to refer to someone attempting to spread the ashes of the deceased at the parks.

This is something of a trend in funeral requests to have ashes spread at places the deceased loved. It happens at sports stadiums, concert halls and theme parks.

Unfortunately, it is inappropriate and normally against the law.

If you would like your ashes spread somewhere after you pass away, talk to your estate planning attorney to make sure that your request is not improper.

For more information about estate planning in Orlando, FL (and throughout the rest of Central Florida), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.

Reference: The Sun (Sep. 7, 2017) "Be Our Guest The secret code Disney theme park staff use to describe the rudest visitors -- so have YOU been called it?"

1031 Exchanges Going Away?

As Congress debates tax reform, one of the more popular ways to avoid capital gains taxes is potentially on the chopping block. However, if that happens, there are other options.

One of the reasons people purchase homes is that the price of real estate almost always goes up. The home is an investment.

When it is sold, it will be worth more than the original purchase price. The seller can use the gain to purchase a better home.

However, there is a potential roadblock in the way.

The difference between the original purchase price and the selling price is a capital gain. It can be taxed, which would make people less willing to sell their homes.

To get around this, the seller can use Section 1031 of the tax code. It eliminates any capital gains tax, if the income is used to purchase something similar, such as another home.

The same logic and rule holds true for other types of investments, including stocks and bonds.

With Congress talking about tax reform and how to pay for it, one thing being considered is to eliminate these 1031 exchanges as Financial Advisor discusses in "What To Do If Congress Eliminates 1031 Exchanges."

While it is probably unlikely that the popular and useful Section 1031 will be eliminated, there is no reason to panic, if it happens.

There are other methods that can be used to reduce or eliminate capital gains taxes that an estate planning attorney can explain.

These methods include things such as grantor retained annuity trusts, charitable remainder trusts and family limited partnerships.

As long as they remain available, you will have options.

For more information about estate planning in Orlando, FL (and throughout the rest of Central Florida), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.

Reference: Financial Advisor (Aug. 28, 2017) "What To Do If Congress Eliminates 1031 Exchanges."

An Absolute Must for College Students

There is a lot to do when first preparing for college. One of those things that should be done is to visit an estate planning attorney to get a power of attorney drawn up.

It might seem a little strange or even morbid to suggest that new college students should see an estate planning attorney. When people go to college, they do not normally think that something bad could happen to them anytime soon, and certainly nothing that will lead to death.

However, there is nothing morbid about it.

People should see an estate planning attorney as part of their college preparations. If for no other reason, this should at least be done to get a power of attorney, as Financial Advisor points out in "College Students Need A Power of Attorney."

It is not that something will happen to new college students. However, it could. Consequently, it is best to be adequately prepared.

For most people, as they grew up, they never had to worry too much about what would happen if they had a serious accident.

If anything did happen, then their parents would be able to manage everything.

That changes once students turn 18 and are legal adults.

Parents cannot legally do things, such as take money out of a bank account to pay bills or make medical decisions, if necessary.

Therefore, how do parents get that legal authority?

The young adults in their life should sign powers of attorney giving them (or someone else) the ability to manage things, in the event there is an accident or illness causing incapacity.

While it is unlikely that it will ever be necessary, preparing for the possibility is a good idea.

For more information about estate planning for all ages in Orlando, FL (and throughout the rest of Central Florida), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.

Reference: Financial Advisor (Aug. 22, 2017) "College Students Need A Power of Attorney."