Orlando Estate & Elder Law

Top Five Keys To Retirement Planning

“The key take-away …there are five key risks in retirement and a three-step process to solve the problem.

Retirement planning is not easy for couples or individuals, or the people who counsel them, according to a recent article in Wicked Local (Topsfield) titled “Your Financial Views: How your retirement can be the ‘golden years’.”

A conference on planning discussed a Harvard Business Review study called “The Crisis in Retirement Planning” that challenged how consumers and the financial industry look at retirement. The author said that the process is broken, which is why many families are not enjoying their “golden years.” The article presents five key risks and some solutions.

The first of the five key risks concerns investments. What if there is a market downturn that reduces your retirement savings significantly?

The second concerns inflation, which was practically dormant for many years.  It is currently heating up again. Your assets and income need to be structured to keep up with inflation.

Withdrawal-rate risk is third. Typically, in the first few years of retirement, people tend to spend more than when they were working. It makes sense. Most people spend more money on Saturdays. When you’re retired, every day is Saturday.

The fourth is sequence-of-returns risk. This involves the order in which investment returns occur and the impact of those returns on people who are near retirement, transitioning into retirement or recently retired.

Finally, the fifth is longevity risk. If you live long enough, goods will be more expensive and the likelihood of a market downturn increases.

The solution is to change how you think about retirement planning. It’s as much about accumulating savings, as about how your retirement accounts will produce a good monthly income stream.

Start by listing your basic necessary expenses and then list your discretionary spending. It is important to know the difference between what you want and what you need. You should structure your income to give you the basic necessary items for life, by incorporating Social Security, pensions and guaranteed income annuities, as well as your retirement savings accounts. Use the remaining assets to protect yourself against inflation and produce any additional income.

Don’t forget to include estate planning in your retirement plan. This includes a will, a power of attorney and medical directive. By having an estate plan, you protect your surviving spouse and heirs from the expenses and stress of settling an estate. An experienced estate planning attorney will be able to help you create an estate plan that aligns with your financial retirement goals.

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: Wicked Local (Topsfield) (Aug. 7, 2018) “Your Financial Views: How your retirement can be the ‘golden years’.”

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.”

Seeking A Good Place to Age

“Since last year, the NAHB has seen a 30 percent increase in the number of its members seeking special training to help older clients who want to stay in their homes for as long as possible. Remodeling a house, is just one way to make that happen.”

The ultimate goal of aging in place is avoiding a move to an assisted living facility or a nursing home. For some people, it may mean staying in their current home or perhaps moving from a home with more than one level to a ranch with one level or an apartment building with an elevator. According to US News & World Report in the article “Tips to Help You Age in Place,” some seniors are moving to “granny houses”—tiny houses located in the backyard of their adult children’s home—or micro-unit housing—small studio apartments in buildings with common living rooms and kitchens.

Which one is right for you? Here are a few things to consider:

Physical safety. If you can’t manage the stairs anymore or if there’s no bathroom on your bedroom level, perhaps you should consider changing your situation.

Neighborhood. Do you love your community? If you have access to your friends, family and good medical care, that’s a good reason to stay in the vicinity.

Support Network. If you were to need assistance for a short period of time or in an emergency, are there people near you who can check on you on a regular basis or arrive quickly in a life-threatening situation?

Cost of Living. Sometimes this factor overrides many others. If you can afford to live in your own home and cover all your expenses, then staying in your home is an option. Remember, as you age, you’ll need different services and not all will be covered by Medicare or Social Security.

Even if you’ve got all these factors covered, you may still need to make changes to your home to make it safer and more comfortable. For instance, if you can’t reach items in cabinets, then move anything you use to a lower cabinet. If arthritis has made reaching for things difficult, then install grab bars and floor treads to avoid falling in slippery bathrooms. If you have a sunken living room, then install a ramp with a handrail, so you can continue to use the room, but can enter and exit safely.

Embrace technology, which makes keeping in touch with loved ones easy. Don’t be put off by the idea of a medical alert button so help can be summoned quickly. Consider installing a video camera in a frequently-used area of your home so a loved one can get a visual check on you every now and then.

You’ll need to make certain adaptations to age in place to ensure your safety.

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: US News & World Report (April 27, 2018) “Tips to Help You Age in Place”

Don't Just Wish - Plan for Retirement

“For most of your working life, it wasn’t exactly a pressing concern. You might have pondered it for a few minutes as you skimmed your company’s benefits handout, checking to see if your new glasses were covered or if you’ll be reimbursed for your gym membership.”

It’s only when their birthday cake is covered with 50+ candles, that most people start thinking  retirement has moved from an idea to a reality, says The New York Times in the article, “Countdown to Retirement: A Five-Year Plan.” Suddenly those ads about annuities and Medicare Part B are a lot more interesting. Even the AARP mailings, are deemed important enough to read.

Retirement is now too close for comfort. Do you have enough money saved? Is your portfolio invested properly, or is it too aggressive? Is it not aggressive enough? What about that long-term care insurance plan you’ve been meaning to buy? Do you have a will?

This sudden awakening usually hits about five years before retirement.  It is not a bad thing. In the next five years, you can take important steps that will enhance your retirement life significantly.  However, you don’t have to make all of these decisions right now. Spread the work out over a few years and do it at a comfortable pace. Just make sure that you do it.

Here’s some key points for planning your retirement:

Take an honest inventory of your finances. How much have you saved, what are you expecting from Social Security and do you have any other retirement income? Will it be enough?

Where do you want to live during your retirement? Start researching communities right now if a move during retirement is in your future. There are an enormous number of choices. Do you want to live in a CCRC—continuing care retirement community—where you start out in a townhouse or apartment and then move to assisted living or hospice as your needs change?

Do you have a long-term care insurance policy? If you or your spouse were to become ill and require long-term care, do you have enough assets to pay for it, while enjoying the rest of your own retirement? If not, you need to consider a LTC policy. They are expensive, but so is the cost of nursing care.

How do you want to spend your time? Many people enjoy the first two weeks of retirement.  However, the reality of not working then hits and they don’t know what to do with themselves. Consider what brings you joy and fulfillment. You’ll have many options: volunteering, going back to school, working part time or maybe even traveling to visit family and friends. These are all possibilities.

Advanced planning for the many different aspects of retirement increases your likelihood of enjoying this next stage of your life.

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 New York Times (July 6, 2018) “Countdown to Retirement: A Five-Year Plan”

Gen X Wants to Retire Too Someday

“Many members of Generation X, who are now in their 40s and 50s, were hit harder by the Great Recession.  They are still catching up financially. This so-called Sandwich Generation also faces challenges in getting ahead financially, while caring for their parents and children.”

Generation Xers, whose retirement funds are lagging, can still catch up, according to an article from CNBC, “What Generation X Needs to focus on to retire successfully.” However, they will need a reality check, if they expect to make any significant inroads.

Members of Generation X, who were born between 1965–1978, are now entering their middle years and are more likely than boomers or millennials to feel that they may never recover.

At the same time that they are getting their careers in order, they are busy caring for aging parents and saving for their kid’s college funds. No wonder they’re behind on retirement savings.

A survey from money manager Personal Capital found that more than 34% of Gen Xers have no retirement savings set aside at all.

As the youngest turn 40 and the oldest now in their early 50s, they do have time to catch up.  However, they need to act decisively and act now. There’s no time for waffling.

Start by figuring out your current financial status. What’s your net worth and how much do you spend on a regular basis? List your assets and debts, then figure out how much money is coming into the household and how much is going out. You most likely will need to make some changes.

Define your retirement goals. It’s much easier to reach goals if you know what they are. Do you need $1 million to retire and continue your current lifestyle? You may need to consider shrinking your spending, extend your working years or shift your retirement expectations.

One hard choice ahead? It’s possible you may need to limit how much of your children’s college costs you can carry. You and your children can take out loans to pay for college.  However, you’ll be hard pressed to find loans for retirement.

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 9, 2018) “What Generation X Needs to focus on to retire successfully,”

Integrated Planning and Retirement and Your Estate

Even if you do not consider yourself to be wealthy it is important to keep your estate plan in mind when retirement planning.

It can be tempting to think of different types of life planning in isolation. People do not necessarily start planning for how they want to live in retirement when they decide what courses to take in college and what type of career they would like to have.

Similarly, many people do not think about their estate planning when they are planning for their retirements. Estate planning is often left for much later.

However, this can be a mistake as Life Health Pro explains in "Bequest goals: more than just an issue for the wealthy."

The primary reason for this is that if you would like someone else to have a given asset after you pass away, then you need to make it so your retirement plan preserves that asset and that you do not have to use it. For example, if you would like to leave your home to your children, then your retirement plan needs to be sufficient enough for you not to have to sell the home to have funds to live on when you are no longer working.

This is true whether you have a large mansion or a more modest house.

What this means is that you should not think of life as entirely separate stages when you do your planning. Think about what type of estate you want to leave behind when you plan for your retirement and act accordingly.

For more information about estate planning in Orlando FL (and throughout the rest of Central Florida), and on how to make an appropriate plan for your situation, visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.

Reference: Life Health Pro (Aug. 9, 2016) "Bequest goals: more than just an issue for the wealthy."

Baby Boomers' Retirement Mistakes

If you want to leave an inheritance for your children and grandchildren, it is important to make sure that your assets are not all spent in your retirement. That requires good retirement planning. Unfortunately, Baby Boomers are collectively making a lot of mistakes.

The best estate plan in the world can be rendered completely useless if there are no assets for the estate to distribute. A trust, for example, is just a piece of paper if there are no funds for the trustee to manage and distribute to beneficiaries.

Despite this truism many Baby Boomers are not properly planning for their retirements, which is a good way to make sure that their estates will lack assets.

Fox Business recently wrote about some of these mistakes in "Baby Boomers' Retirement Woes Summed Up in 5 Statistics."

These mistakes include:

• Social Security – 59% of Baby Boomers are planning to rely heavily on Social Security. The problem is that Social Security benefits are not designed to provide a full income and they may need to be cut in the future.
• No Savings – 45% of Baby Boomers do not have any retirement savings at all.
• Postponed Plans – 30% of Boomers report that they have had to postpone their planned retirements due to lack of savings.
• Stopped Contributions – 30% of Baby Boomers stopped making regular contributions to their retirement accounts. It is important to make contributions even if you do not think you need any more money in the accounts.
• Debt – 44% of people over the age of 65 still have debt that needs to be paid off. Debt payments cut into the amount of money they have for living expenses.

This is not good news for Baby Boomers or the children expecting to inherit from them.

If you would like more information on the many facets of retirement planning, please schedule an appointment.

Reference: Fox Business (May 15, 2016) "Baby Boomers' Retirement Woes Summed Up in 5 Statistics"

Inheriting an Annuity Can Be Taxing

If you inherit a non-qualified annuity, then before you decide what to do it is important to understand the different options and tax implications.

Annuities have become an extremely popular tool in people's retirement plans. Like any other asset, these contracts can be the subject of an inheritance.

If they are inherited then the beneficiary needs to know what the options are for handling the annuity and what the tax consequences are. First, if a spouse inherits the annuity, then he or she can almost always continue the annuity contract as it is and thus face no immediate tax issues.

As the Motley Fool discussed in an article entitled "Tax Rules for an Inherited Non-Qualified Annuity," non-spouse heirs typically have three options, including:

• Take a Lump Sum – If an heir chooses a one-time payment, then the heir will need to pay income tax on any appreciated amount over the original premium payments the deceased made.
• Arrange for Smaller Payments Over Time – By accepting smaller period payments, the heir can avoid a large one-time income tax payment. However, income tax will still be owed on any appreciation of the annuity.
• Switch to a Different Annuity – The person who purchases an annuity can switch to a different provider without paying income tax. However, it is unclear if someone who inherits the annuity can do the same. In a private letter ruling the IRS allowed one heir to do so, but many annuity providers do not wish to rely on the ruling as it technically only applies to the person who asked for it. Some providers will work with heirs on switching providers though.

If you inherit a non-qualified annuity and have questions about what to do with it,consider setting an appointment with me to talk about these options and which is the best choice for you.

Reference: Motley Fool (Dec. 19, 2015) "Tax Rules for an Inherited Non-Qualified Annuity"

One More Scary Halloween Story!

A Halloween riddle for you: What's scarier than ghosts and goblins to Americans 50 and older? Answer: Their finances.

That's the upshot of the latest Country Financial Security Index, and two other surveys I've seen lately back it up. In fact, there's a strong case to be made that many boomers have grown truly scared of investment risk as a result of what they experienced in the 2008-2009 financial crisis and market crash. The new survey of 1,000 adults from Country — a group of insurance and financial service companies — found that 81% of people 50+ have at least one financial fear. What spooks them most: being able to afford health care expenses and being able to retire comfortably. Women 50 and older were more likely than men to worry about being able to retire comfortably, 34% (men) vs. 39% (women) cited this as a fear.

Forbes recently published an article, "What Spooks Us Most About Money," in which they reported that health care expenses are the biggest fear among Americans 65 and older, according to the survey. Compare that to the top worry of Millennials, which is affording their rent or mortgage.

But here's the scariest part of the survey: about 21% of the 50+ respondents said their financial fears are holding them back from reaching their goals. That's gotta give you some estate planning chills! Many people 50+ are also undoubtedly scared of what will happen to their financial assets after they die and whether their loved ones will receive proper care.

The whole subject of estate planning gives some people the willies. It is scary to think about dying and planning for what may happen after your death. But not thinking about it could wind up haunting your family for years to come.

If you fail to name guardians for your children in your will, the court might name them for you. And if you don't have a written estate plan, your wealth could go to heirs you hardly know or do not want to have an inheritance.

Sit down with a qualified estate planning attorney and have him or her draw up a will or trust, if you haven't done so already. Ask if it would be wise for you to have one or more trusts, which can be extremely helpful if you have children or grandchildren with special needs.

Please call for a consultation and we can deal with those fears one step at a time.

Reference: Forbes (October 30, 2015) "What Spooks Us Most About Money"

Making Charitable Contributions Tax-Wise

While you're alive and have philanthropic goals, give appreciated assets held in a taxable account to charity. For charitable bequests, designate your IRA or tax-deferred employer retirement plan. Why? Suppose a hypothetical Al Cole wants to give $10,000 to charity this year. Instead of cash, he donates $10,000 of ABC Corp. stock that he bought for $2,000. As long as Cole's holding period is more than one year, he'll get a full $10,000 charitable tax deduction. Yet those shares might be worth only $8,000 to Cole after paying tax if he sold them himself. The retirement planning and estate planning benefits are big. Say Cole has $1 million of securities: $500,000 in a taxable account and $500,000 in a traditional IRA. Cole wants to leave $500,000 to charity and $500,000 to his son Bob, who is in a high income tax bracket. If Cole leaves the taxable account to charity, Bob will inherit the IRA. Bob will have to take distributions, which will be highly taxed on top of his other income. Instead, Cole can leave his $500,000 IRA to charity. The charity or charities can cash in the IRA bequest and owe no tax, as they are tax-exempt. Now Bob will inherit the $500,000 taxable account. He won't owe any income tax on money he withdraws. He also won't owe any capital gain if he happens to sell securities in the account right away, before they gain more value. That's because he gets a cost basis step-up to market value on those assets.

Investor's Business Daily's recent article, "How You Can Squeeze Tax Breaks From Charitable Giving," says that this maneuver works very nicely if the taxable account holds appreciated securities. A Partial Payout strategy applies whether you want to bequest all or just some of your IRA. Experts suggest that it's better to use your IRA for donations in your estate plan. But you have to decide how you want to do it.

Consider the following scenario as an example: Ida Bass has a $500,000 traditional IRA, and she wants to leave $50,000 to charity from that IRA. The rest of the IRA is to be split evenly between her two children (Many IRA beneficiary forms require percentage allocations for multiple beneficiaries). Another way to do it would be for Ida to just leave 10% of her IRA to charity. The IRA form could designate that each of her kids will inherit 45% of the amount in the account at her death. This would leave the dollar size of her charitable bequest indefinite—potentially leaving more to the charity if the IRA grows or less if its value decreases.

Whether you implement the fixed amount or the percentage approach, problems can arise. Those who will inherit the balance of the IRA need to ensure that the charity is paid in full before September 30^th of the year after the death of the donor. If you do that, those getting the balance can stretch out required distributions of the IRA balance and extend their tax deferral. However, if you miss the September 30^th deadline, the taxable distributions will be accelerated. So individual beneficiaries should be aware of what they need to do if a charity also is on the form.

One other idea is to split the IRA. Bass could transfer $50,000 from her $500,000 IRA to a new IRA account, so that her favorite charity would be the beneficiary of the new IRA. That way her children won't have to worry about the charity if they want to claim the maximum tax deferral from the IRA they inherit.

Please arrange a consultation to speak with us and to learn more and to see if this strategy, or another charitable giving strategy,  is right for you.

Reference: Investor's Business Daily (October 02, 2015) "How You Can Squeeze Tax Breaks From Charitable Giving"