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Estate Planning for Singles: What You Need to Know

“For those who are single, whether they’ve always been single or they find themselves single again, there are some unique [estate-planning] issues,” says Doug Rothermich, managing director, wealth-planning strategies at TIAA-CREF.

Married couples usually can see the benefit of having an estate plan, but single people mistakenly think estate planning does not apply to them.

Accordingly to a recent Wall Street Journal article titled “Estate-Planning Essentials for Single People,” single people face some unique estate planning issues. This is true whether they have always been single or now single again.

The original article reviewed several areas that should be of concern when it comes to estate planning for singles, to include:

Heirs. If you die and don't have a will or trust, your property may be divided up by the probate court according to the laws of your state. While that might work for some married couples who have children, it rarely works for single people. Typically, if you're married and you die without a will or trust, your spouse inherits most if not all of your assets. On the other hand, if you're single and die intestate, your estate could get distributed in unintended ways. Generally it passes first to your children (if any), then to your parents (if they're alive), any siblings, then more-distant relatives. Last, if no living relatives can be found, the state will take it!

So you can see how important it is to at least create a will and/or a revocable living trust that states specifically how you want your assets to be distributed after you die, as well as to name an executor and/or trustee to carry this out.

Decision Makers. If you don't designate an individual to take care of your financial and medical affairs in the event of your incapacity, your assets and care could fall into the hands of a distant relative or a stranger appointed by a judge. Be sure to sign a general power of attorney, an advance health-care directive, and an authorization for federal HIPAA laws to empower trusted individuals to make financial and medical decisions on your behalf in the event you become incapacitated. For those without spouses or children to fill these roles, it's especially important for single people to take care of this.

Estate Taxes. Any tax liability for your estate depends on how you are single. If you never married or you're divorced, any of your estate that's more than the federal individual exclusion is subject to tax. If you are a recent widow or widower, your federal exclusion amount includes—not only the individual estate-tax threshold—but also may include any unused portion of your deceased spouse’s exemption amount, which is termed “portability.” This is true even if you remarry. While the federal estate-tax exemption has risen in recent years, 19 states plus D.C. impose estate taxes of their own and/or inheritance taxes on the heirs who receive these assets.

Just a few states follow the federal portability rules, so you might need to create a special trust to make use of two exemptions. An experienced estate planning attorney can assist you with this.

If you are single or know someone who is, then these estate planning moves should be made without delay. This is not a do-it-yourself project either. Get help by contacting an experienced estate planning attorney, Robert A. Gordon of Redkey Gordon Law Corp.

Reference: Wall Street Journal (December 7, 2014) “Estate-Planning Essentials for Single People”

Ring In the New Year with a Roth IRA

Sharron Epperson, who is CNBC’s senior personal finance correspondent, stressed the importance of retirement planning in the coming year — with two products in particular.

Need a financial resolution for 2015? Save as much money as you can in a Roth IRA. One of the best things you can do to set yourself up for financial success in the future is to be strategic with your savings.

According to a recent article at gobankingrates.com, titled “CNBC’s Sharon Epperson on Why You Need a Roth IRA in 2015,” in the event of an emergency make sure you're able to withdraw your contributions at any time without incurring penalties or fees. This is also a terrific way to save for retirement, because you might be in a higher or lower tax bracket when you’re in your 60s. Who knows?

With a Roth IRA, typically you can withdraw money tax-free after age 59½. If you qualify for a Roth, you could save up to $5,500 in 2015, or $6,500 if you’re 50 or older. Don’t forget that you have until April 15th to make your contributions for 2014.

Another type of Roth account for retirement savings is a Roth 401(k). This version doesn't have any income limits. If your job has this type of retirement plan (many large employers are expected to offer a Roth 401(k) option in 2015), you can contribute up to $18,000 next year (or $23,000 if you’re 50 or older).

Unlike a traditional IRA or 401(k), Roth contributions won’t reduce your taxable income; however, your overall tax savings (tax-free withdrawals) are likely to be much greater when you retire.

Get additional information by contacting Robert A. Gordon, an experienced estate planning attorney.

Reference: gobankingrates.com (December 6, 2014) “CNBC’s Sharon Epperson on Why You Need a Roth IRA in 2015 ”

Forget the Store-Bought Presents, Give Assets Instead!

Gifting can be an estate planning tool, for you can save on future estate taxes and have the pleasure of watching your dollars work for your children or grandchildren while you are still alive.

If you're tired of the standard store-bought items for gifts, you may consider a different spin on gifting. What about giving away some assets to your children or grandchildren?

In certain states, the estate exemption is just $1 million, not the $5 million (indexed for inflation) as at the federal level. CBS Boston's recent posting, titled “All About Gifting Assets,” warns that things can get complicated pretty fast and you should have a good estate planning attorney to help you.

The annual gift exclusion for anyone is $14,000. That means you can transfer this amount this year (and then next) to as many recipients as you want, provided you have the money to make the gifts. If married and your spouse joins in, then you can gift a total of $28,000. What's more, you can pay medical or school bills for an individual and not incur a gift tax. In other words, such “gifts” are not counted toward that gift exemption amount.

Taking advantage of these opportunities is a great idea, so why not give away some money to help the next generation accomplish their goals (or to pare down your estate so you won’t owe estate taxes). For instance, if you have an estate worth $1.2 million, there will be no federal estate taxes but (depending on where you live) some state estate taxes. Would you rather give it away to your family or to the government?

If any of your grandchildren are in college or grad school you can pay their tuition and medical insurance, but you need to pay it directly to the school or insurance company. And after paying the bills (if you still have some money left), you can still hand over a check to them for $14,000, or with your spouse, you can make it $28,000.

Want to find out more? Contact your local Amador County experienced estate planning attorney Robert A. Gordon of Redkey Gordon Law Corp.

Reference: CBS Boston (November 27, 2014) “All About Gifting Assets”

Recent Survey Says 80% of Americans Failed Retirement Literacy Test

“We’re not surprised by the fact that people don’t know a lot about retirement income planning,” says David Littell, program director at the American College. “I was surprised at how badly they did.”

Could you pass a retirement literacy test? Apparently, 80% of Americans surveyed did not.

These Americans were polled on 38 retirement literacy questions on basics like Social Security, life expectancy, IRAs, life insurance and investments, and the mechanics of bonds. Sadly, only 20% were given passing grades, the college said. This isn't the first survey to raise concerns about Americans’ retirement readiness. In an article titled “Americans fail in retirement literacy,“ The (Palm Springs, CA) Desert Sunnoted similar shortcomings in a 2011 report.

However, the findings of that earlier report weren’t nearly as bad.

According to the article, retirement literacy and planning are critical today more than ever because Americans are on their own when it comes to retirement. Company pension plans typically have been replaced by company-sponsored 401(k) plans and IRAs.

The original article reports that many Americans — of all ages — didn’t have the best financial role models in their parents, nor do we get any formal training or teaching in the area of investments, Social Security, long-term care and related topics.

Here are a few highlights of the new report:

• Only 1 in 4 have a written financial plan;
• A significant minority have never figured out how much they need to retire;
• Only 31% know that $4,000 is the most they can afford to withdraw per year from a $100,000 retirement account to make it last 30 years;
• More than half underestimate the life expectancy of a 65-year-old man, meaning they might not know how long their assets must last; and
• Just 54% realize that Social Security benefits increase each year you delay retirement up to 70 and don't know that it is best to wait until 70 to claim Social Security if you expect to live to 90.

The article states that many people lack important knowledge about financial products and investing in general: this collective financial ignorance threatens to undermine the security of retirees. Talk to an experienced estate planning attorney to make sure you are getting good grades regarding your retirement knowledge or can start now on some extra credit to ace this all-important test. 

Need more information? Contact Robert A. Gordon of Redkey Gordon Law Corp for experienced advice.

Reference: The (Palm Springs, CA) Desert Sun (December 6, 2014) “Americans fail in retirement literacy”

Forget the House - Who Gets Grandma's China?

There is no magic formula or solution available for transferring personal property because each family and their possessions are different. However, the Extension program "Who Get's Grandma's Yellow Pie Plate?" suggests there are some factors for every family to consider whether planning for the transfer an individual's own personal property or working together to plan the transfer of items belonging to a family member.

While an estate plan is critical in dealing with titled property, there are few individuals who take the time to plan ahead regarding the items in their household.

An article recently published in the Hays (Kansas) Daily News, titled “Discussion might ease transfer of family heirlooms,” looks into this issue and offers some advice.

Personal belongings like holiday decorations, jewelry, stamp collections, furniture, photo albums, quilts or sports equipment are referred to as non-titled property—which means there's no legal document (such as a title) to indicate who owns the item.

As the original article states—and you can imagine that this is the case most of the time—the decisions about non-titled property are not often made during ideal circumstances. Many times these decisions are made in times of transition, like remarriage, the downsizing of the family home, or during a family crisis like a death or moving an elderly family member to a health care facility.

This whole decision-making process is more challenging and sensitive when family members are emotional and focusing on these other events. While not easy, the original article says decisions about the transfer of personal property have the potential to be a time to reminisce, share memories, or work together through the grieving process.

Unfortunately, there's no magic formula or solution available for transferring personal property, as every family and their possessions are different. However, you should bear in mind some critical factors, to include:  

• Understanding the sensitivity of the issue for both owner and heirs.
• Determining what you want to accomplish in the transfer process.
• Deciding what's "fair" in your family.
• Recognizing that belongings have different meanings for different people.
• Exploring distribution options and consequences.
• Agreeing to manage conflicts if they arise.

Property owners have the legal right to decide when and how to transfer their non-titled property. When this is before death, it allows the owner to consider the wishes of recipients and enjoy the gifting process. If this is done after a death, there's a chance that the disbursal might not reflect the wishes of the owner. When you add to this emotions and an individual's sense of entitlement, then it's hard to know in these circumstances what's "fair." This can be the source of real conflict. Disputes about an inheritance might cause siblings to break off relationships with each other.

Transferring non-titled personal property takes time, as well as physical and emotional energy. This holiday season might be a good time to begin conversations about family belongings.

More open and honest communication among the people involved is always a good thing and can make these arrangements smoother with less conflict.

For further information regarding this contact Robert A. Gordon, an experienced estate planning attorney, of Redkey Gordon Law Corp.

Reference: The Hays (Kansas) Daily News (November 27, 2014) “Discussion might ease transfer of family heirlooms”

Estate Planning Tips from Santa: Make a List and Check It Twice!

Yes, nobody relishes thinking about the day when they will no longer be around. But with a little effort and foresight, you can give your family the ultimate gift: a piece of mind. Here's a quick checklist of estate planning essentials.

Not really ready for an estate planning talk around the fire this holiday season? It's definitely not a pleasant conversation when considering the end of one's life. Yet, if you could give your family the gift of "peace of mind", would you? Probably so. What does this gift look like?

The Street’s recent article, “The best holiday gift for your family: estate planning,” gives us a quick checklist of estate planning essentials:

Wills and Trusts. These legal documents state how you'd like to distribute your estate after you are gone. You can also appoint a legal guardian if you have minor children. Without a legal will that’s up-to-date, your assets might be divided by the probate court according to state law, rather than how you would want. Dying “intestate” can create problems for your heirs, and it can be a long and expensive process.

Living Trusts. Some people prefer creating a living trust. A living trust is a legal document that places your assets into the trust for administration during your lifetime. You can name yourself as the trustee and even appoint someone else in the event you become incapacitated. When you die, the assets are transferred to your beneficiaries as you provide. The great thing about a living trust is that it is much more difficult to challenge by a claim on your wealth. Also, a living trust isn’t a public record, so your privacy is protected, and your wealth can be divided up without state oversight.

Living Wills. If you become seriously ill and are unable to make decisions for yourself at the end of your life, you will be glad you have a living will. This, along with a health care directive and power of attorney, will make sure your medical care is as you wish.

Durable Power of Attorney. Estate planning attorneys will advise you to have a trusted individual who can handle your finances and property if are disabled and are unable to take care of your own affairs. 

Life Insurance. If you own a home with a substantial mortgage and have young kids, you want to make sure you have enough life insurance to pay for their educational expenses.

Crucial documents. The original article also advises that you make sure your spouse, family, and estate planning attorney know the location of the documents they need to execute your estate according to your wishes.

So be jolly this holiday season, and take these important, practical steps to make sure your estate passes easily to the next generation when needed. To find out more, contact your local Amador County experienced estate planning attorney Robert A. Gordon of Redkey Gordon Law Corp.

Reference: The Street (December 4, 2014) “The best holiday gift for your family: estate planning”

Financial Guidance for Late-in-Life Divorces

"There are no 'do-overs' after you agree to a settlement," says Vickie Adams, a certified financial planner and certified divorce finance analyst in San Pedro, Calif. "After 50, you'll have fewer years to recoup from financial errors, so it's essential to get this right." Here are a few tips for protecting your finances during a later-in-life divorce.

Unfortunately, divorce is possible at any age. But there are differences in financial tactics depending on your stage of life, particularly for divorce after age 50. A recent article in USA Today, titled "Protect finances in later-in-life divorce," provides some tips for protecting your finances during a later-in-life divorce.

Use a third party mediator. Although some couples can sort things out on their own, many others use an impartial third party to help with the process. The original article says that couples heading into a divorce who choose to litigate should give their attorneys permission to contact their accountant, estate planning attorney, and financial adviser.

Look at your shared and individual debt. Hidden debt can be a nasty surprise when people divorce, and is all the worse if you live in a community property state where you’re responsible for half your spouse's debt—even if the debt isn't in your name. In non-community property states, you can still have trouble if you and your spouse hold credit cards or joint loans. Get a full credit report before filing for divorce to be aware of hidden debts prior to negotiations.

Review your assets and retirement benefits. Most assets will be considered marital assets, notes the original article. Consider paying out a lump sum to your spouse for a lower amount than if you were to hold onto the assets. You can also transfer certain assets into a life estate or into a trust for your other family members. Don’t make any moves without consulting your legal counsel!

Some believe their divorce decree is protection for their retirement account. Not so. You need a separate order, typically called a Qualified Domestic Relations Order. This order covers the division of retirement benefits and allows money in a plan to be distributed to another owner without the usual transfer taxes and penalties. You should also look at the beneficiaries on assets like life insurance, investment accounts, and bank accounts to see if you need to make any changes.

Hold on to health care. A settlement should incorporate any specific health issues to ensure adequate long-term care. Some states allow the insured spouse to extend coverage to the dependent spouse. In some circumstances, it may be wise to permit a spouse to keep receiving health care coverage. If that’s not an option, make sure to shop for potential health insurance plans and factor those costs into the agreement.

How divorce can affect your Social Security. Even if you remarry after your divorce, your former spouse is entitled to benefits based on your Social Security record if that marriage spanned more than 10 years and if he or she is over 62 and unmarried. The amount of the benefit is calculated on your former spouse's earnings versus the amount he or she would receive from your benefit.

After your divorce, you should concentrate on rebuilding your financial security. Speak with Robert A. Gordon at Redkey Gordon Law Corp, an experienced estate planning attorney, to evaluate your new financial situation and to uncover new opportunities to save and invest for a more certain future.

While you are at it, get your estate plan revised! If you have questions or want to discuss revisions to your trust, speak with Robert A. Gordon, an experienced estate planning attorney.

Reference: USA Today (November 23, 2014) "Protect finances in later-in-life divorce"