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Divorce Will Impact Your Estate Planning

Once you're divorced you should immediately create a new estate plan -- a will or revocable living trust, a healthcare power of attorney, and a living will ("pull the plug") designee. Read on for more estate planning must-do’s regarding divorce.

A recent article in the The Huffington Post, titled “Divorce and Money,”says that you should always listen to your attorney about the applicable laws in your state regarding divorce and your estate. In addition, the article says that you should also look at the following issues.

The division of property in a divorce is typically not taxable to either party. However, if instead of dividing marital property, one spouse agrees to monthly maintenance (alimony), this will be taxed as ordinary income. And it’s deductible to the paying spouse. The original article also notes that the spouse receiving the maintenance checks must make a quarterly estimated federal and state tax payment, so you need to plan accordingly.

There aren’t really any tax issues associated with child support payments, except for deciding who claims the children as dependents on their tax return. However, as you can imagine, these financial decisions for the children carry the potential for some problems down the road. Usually the parties agree as to who will fund college costs. Yet, when college tuition needs to be paid, that parent just might have a new family and new responsibilities. One option to avoid this headache is to set up a 529 college savings plan now to begin saving for that day.

Many divorce agreements include life insurance to fund future promises of payments. The spouse receiving the death benefit should be the owner and beneficiary of the policy with the ex-spouse making the premium payments. Without this arrangement, there’s nothing to keep an angry ex from changing the beneficiary on that policy.

Another critical issue after a divorce is estate planning. Once you're divorced you should create a new estate plan right away. This can include a will or revocable living trust, a healthcare power of attorney, and a living will. The court will have the ultimate say over the guardianship of your children; however, in a contested divorce, the court will take your written wishes into account. Consult with Robert A. Gordon of Redkey Gordon Law Corp, an experienced estate planning attorney and make sure he takes you through a discussion on all of your options.

It isn't easy getting divorced, but when it’s over, you'll need to rebuild. Think about these areas as part of your divorce documentation.

Reference: The Huffington Post (March 18, 2015) “Divorce and Money”

Beatles Lyrics May Not Get Same Answer Today with Rising Long-Term Care Costs

"Will you still need me? Will you still feed me? When I'm 64?" The Beatles first released these quaint, clarinet-fueled lyrics in 1967 when the loving answer to these questions was a resounding, "Yes!" Traditional marriage vows echo this sentiment in that they presuppose a relationship span that encompasses young and old age, wellness and serious illness, wealth and poverty. However, as modern aging has come to be defined by living longer with chronic care needs, and providing long-term care has shifted to the public sector, with two thirds of long term care services paid for by Medicaid, loving spouses may be forced to answer, "No," to these questions. The future of elder care may depend on divorce.

Aging and care are already expensive and stressful, and even the young Beatles in 1967 wondered if love now would translate into care in old age. It should.

In case you haven’t heard, long-term care needs are expensive. In 2014 the average annual cost of a semi-private room in a skilled nursing facility was $83,114! The majority (70%) of people over 65 need some level of long-term care at some point—whether that will be provided in a home, an assisted living center, or a nursing care facility, according to The Huffington Post in a recent article titled “Is Divorce the Best Option for Older Americans?”

To find a way to pay for these services, many Americans look to the Medicaid Long-Term Care benefit. This program can pay for the room and board or home health services of qualifying individuals over age 21. To be eligible, an individual must meet the age and medical necessity criteria, as well as financial criteria concerning income determined by the federal government. Medicaid will look at an individual’s assets—like their banking accounts, real property, investments, household belongings, life insurance, and one car. However, all income and assets are subject to a five-year look back period: you can’t just give away stuff to avoid it being counted as an asset for eligibility. However, if a person has financial excess, Medicaid allows him or her to "spend down" their income and assets in order to be poor enough to qualify. Doesn’t that sound a little tricky?

The original article explains that for married couples Medicaid has what are called "spousal impoverishment" rules. These rules cap the assets for a couple living together, although the rules are totally different if one spouse resides in an institution. The spouse living in the community typically is allowed to retain a larger portion of income for his or her living expenses. Medicaid will not try to recoup the costs for the long-term care from the estate of the deceased recipient until the community spouse passes away.

While all of these rules enable elderly and chronically ill individuals to access needed long-term care services, the original article argues that these rules also tacitly encourage divorce. "Medicaid Divorce" isn’t a new phenomenon. It’s been considered a legal option for avoiding the five-year look-back period for Medicaid eligibility and for avoiding the estate recovery process. Legal experts emphasize that asset protection is super-complicated, and it may be different in another state. All that said, the solution of divorce is still a hot topic, as these rules discourage couples from living together and looking after each other. A couple's combined assets are only protected if the Medicaid recipient doesn’t live with his or her spouse, so by divorcing, a couple can cohabitate and still protect the income and assets of the spouse not receiving Medicaid home health benefits.

According to the original article, a divorce could also protect the primary residence from the Medicaid Estate Recovery program: the surviving spouse is given the right to use and enjoy it even though it’s owned by someone else. The surviving spouse lives there until his or her death, then the state is able to recoup the costs of care from the estate. That means that the next generation pays for the care of their loved ones by losing a potential inheritance. A divorce could keep the real property in the name of the community spouse and protect it from recovery for Medicaid care expenses.

Is this really the answer? Talk to Robert A. Gordon of Redkey Gordon Law Corp, an experienced elder law attorney and find out about divorce and other options.

Reference: The Huffington Post (March 16, 2015) “Is Divorce the Best Option for Older Americans?”

“House of Cards” on Retirement: You Are Entitled to Nothing

Frank Underwood is not a real person. He’s the crooked politician portrayed by Kevin Spacey in the Netflix series “House of Cards” who claws his way into the White House by manipulating the press and ruthlessly crushing anyone that might get in his way. But sadly, with one line, he delivered more honesty than I have seen from any president, senator or House representative, from either party, in my lifetime: “We’ve been crippled by Social Security. By Medicare. Medicaid. Welfare. And entitlements. And that is the root of the problem. Entitlements. Let me be clear: You are entitled to nothing.”

Frank Underwood, Kevin Spacey’s character on House of Cards, gives us the cold, hard truth about retirement. Social Security and Medicare are not “rights” in any legal sense. Congress decides on the payout, and Congress can change it—or eliminate it—at any time. You really are not “entitled” to anything and certainly nothing is guaranteed, according to a recent Forbes article titled “Life Lessons From House Of Cards: "You Are Entitled To Nothing".

You are entitled to nothing. It’s not fun to hear, but it’s important to remember when you’re planning your retirement. You should plan under the assumption that your benefits in retirement will be lower than currently promised. With that in mind, here are three specific recommendations from the article’s author on how to approach your planning:

1. Focus on income rather that the “magic number.” Most financial planning is driven by creating a nest egg of a certain size. But this doesn’t take into consideration the market yields. Focus on the income generated instead of only a certain net worth number.
2. Consider investments you might not have looked into before. Investments like preferred stock and closed-end bond funds can be good income producers if bought at a reasonable price.
3. An immediate annuity can be a smart method of converting part of your nest egg into a safe stream of income resembling a pension.

Take President Underwood’s words to heart—You are entitled to nothing—and start planning accordingly. Contact Robert A. Gordon of Redkey Gordon Law Corp, an experienced estate planning attorney.

Reference: Forbes (March 20, 2015) “Life Lessons From House Of Cards: "You Are Entitled To Nothing"

Don’t Just Think about Your Estate, Plan for It!

The sad truth is that most of us — some 70% of adult Americans — have neglected to write a will. Some think their assets are just too puny to worry about, others worry that the costs of writing a “last will and testament” are too high. But wills aren’t just vehicles for the wealthy or the morbid. If you’ve got a family and a home — not to mention a savings account — you should definitely have one. Cost is no excuse.

A recent MarketWatch article, titled “Why wills aren’t just for the wealthy,” sheds light on this important life-planning topic.

Like many people in the U.S., you may not think about estate planning until you have kids. A will is critical when you have children, because people think about what would happen if both spouses die at the same time. Without a will, a probate court judge will be tasked with selecting the individual who will care for your minor children as a guardian. That could be just about anyone, including a person you would never ever pick to take care of your kids! Why not name someone yourself right now? You also should name an alternate guardian in the document in the event your first choice is unable to serve.

Writing a will is also your opportunity to detail who gets what in your estate. But before you can do that, you need to count your assets. This includes your house, investment portfolio, retirement plan account, and the proceeds from any life insurance coverage. After doing this exercise, many folks see that they’re worth more than they initially thought.

Next you need to decide what you want to leave to whom and who will be executor of your estate. The original article notes an important caveat: check and see that the beneficiaries listed in your will match the beneficiaries you name for your insurance policy, 401(k), and any other retirement accounts. These documents trump your will.

You may also want to do more complex estate planning, such as a trust. Most people create these to protect their heirs from having to pay hefty estate taxes and perhaps to protect their heirs from themselves if they are not very good with money.

The original article reminds us that once you have a will in place, don’t forget to update it on a regular basis and to change it whenever you have a significant change in your family, like a birth, a death, or marriage. Doing all this prep work for when you’re gone may seem like a hassle, but it’s nothing compared to the headaches your heirs will have without solid estate planning in place.

Consult with Robert A. Gordon of Redkey Gordon Law Corp, an experienced estate planning attorney who can guide you through these and other considerations.

Reference: MarketWatch (March 17, 2015) “Why wills aren’t just for the wealthy”

James Earl Jones Discusses Elder Law Topics on “In America”

"In America" will discuss elder law and the way that legal standards and details are changing over time.

What exactly is Elder Law? Why is this so important for Americans?

Elder law is a general term that describes the laws and regulations that affect older men and women. This term can relate to the proper care and guardianship of an older person who requires medical attention and can no longer function without assistance. The recent Insurance News Net article, titled “Elder Law is discussed with host James Earl Jones on "In America,” notes that the range of topics elder law addresses includes divorce among adults over 65 years old and law regarding elder abuse.

Elder law attorneys for individuals, or for their loved ones, advocate for their clients’ rights and personal goals. They handle details related to estate planning, retirement, government programs like Social Security and Medicaid, and guardianship when a senior is unable to deal with his or her own personal affairs. This also includes long-term care, nursing home issues, and end-of-life planning.

Because this is such a broad category of laws and the effects of those laws differ based on the circumstances, elder law attorneys provide services that focus on the specific goals and concerns of older men and women. The options that are available to an individual or their family will depend on the situation and the person's health. This is why it’s a good idea to speak to an experienced elder law attorney to discuss your particular situation and your objectives.

You can find information about elder law on "In America" with host James Earl Jones. This is a good introduction and can get the discussion going. However, to get concrete answers for your or your loved one’s situation, seek the help of Robert A. Gordon of Redkey Gordon Law Corp, an experienced elder law attorney.

Reference: Insurance News Net (March 16, 2015) “Elder Law is discussed with host James Earl Jones on "In America"”