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Prior Planning for Financial Bumps before and during Retirement Should Be a Priority

With two-thirds of Americans experiencing disruptions to their retirement planning resulting from divorce, major illnesses, unemployment or business troubles, the road to retirement has become bumpier than ever, according to a new TD Ameritrade survey. The challenges add up to $2.5 trillion in lost retirement savings. The news is gloomy, but knowing that there are and will be problems on the road to retirement reminds us that planning should include these kinds of problems, and responding to financial disruption in a timely manner is necessary for successful retirement planning.

 

The website Real Deal Retirement gives us three ways to stay on track during our journey toward retirement. The article, titled “Retirement Interruptus: 3 Ways To Prevent Disruptions From Derailing Your Retirement Plans,”gets right to the point:

 

1. Consider Alternate Retirement Realities. Remember that an assessment of your retirement prospects from a retirement calculator, doesn’t mean that your retirement’s going to go precisely to that plan. Just like the weather forecast, things can change. “The best-laid plans of mice and men…”

 

With that in mind, you should run through a variety of different scenarios to get a feel for how you might do under a variety of different conditions, such as higher inflation or lower investment returns. The article suggests you look at some worst-case scenarios like extended unemployment when you aren’t able to save, forced early retirement, or an accident with large medical bills or other expenses in retirement that can take a big bite out of your nest egg.

 

2. Make Certain You Have a Safety Net. Once you have an idea what one of these alternatives may look like, look for ways to alter your planning to mitigate some of the possible damage. The thought most people have is to boost savings balances by investing more aggressively. This may be okay if you’re currently investing very conservatively (for example, with CDs and bonds). However, if you already have a very well-balanced portfolio that works with your risk comfort level, getting more aggressive could backfire and leave you even more vulnerable to a market crash.

 

If you’re still working, the article advises that a better route is to look for opportunities to save more—even if you’re very near retirement. You can still try to save a little more of your salary each year, which can significantly boost retirement account balances and make it easier for you to recover from a setback. This is backed up by the survey, which found that people who’d experienced a financial disruption said that saving a greater proportion of income (44%) and getting an earlier start on saving (36%) were the things they suggest to others in a similar situation.

 

If you’re already retired, spending less is the focus, instead of saving. Examine how you can eliminate spending without creating a major negative impact on your standard of living. Create a retirement budget that divides your spending into essential and discretionary categories to see what kind of wiggle room you have and identify possible areas to cut.

 

3. Get Going! If you have had your retirement planning disrupted, take corrective action right away. Waiting with the hope that the setback may just be temporary or that you might be able to fight your way through without changing things is just going to make it worse. The article suggests reducing spending, and that’s what 79% of the people in the survey did. However, for many—particular those who are unemployed—the retirement contributions may be one of the first things to go. Using your savings should always be a last resort, and if you must do this, try to pull money out of your non-retirement accounts first. If you are forced to tap retirement accounts, try to minimize your taxes and early withdrawal penalties.

 

If you have a set-back when you’re retired, immediately analyze your retirement budget and pinpoint ways to cut back your withdrawals. The article warns that if you experience a hit to your nest egg—especially early into retirement—you can significantly increase the odds of running out of money during your lifetime. Remember to work those retirement calculations to get a sense of what level of spending you can reasonably expect to maintain without going through your money too quickly.

 

We all know that every road has some bumps and potholes, and some can’t be avoided. Talk with Robert A. Gordon of Redkey Gordon Law Corp, an experienced estate planning attorney and create a solid plan with some “what ifs” baked in for your retirement. If you add these into your planning and respond quickly if they occur, you should be able to minimize the damage.

 

Reference: Real Deal Retirement, “Retirement Interruptus: 3 Ways To Prevent Disruptions From Derailing Your Retirement Plans.”

Estate Planning Isn't Just about Money

Estate plans are more about reducing the stress on your heirs and ensuring that your wishes for the assets you leave behind are distributed as you wish than they are about money.  Instead of focusing on a list of bank and investment accounts, trying thinking about those you love, and what you wish to leave to them after you are gone. That is the real heart of estate planning.

 The Saint Paul Pioneer Press recently published an article, titled “Your money: Wealthy or not, you need an estate plan,” which emphasized that everybody is in need of an estate plan and provides a few tips to consider:

 1. There’s More to Estate Planning than Just a Will. The article reminds us that a will isn’t all that is needed to make your wishes known to your family and friends. Rather, it’s part of a thorough and well-thought-out estate plan. Your estate planning attorney can help you with other pieces, such as powers of attorney, health care directives, life insurance policy beneficiary designations, and trusts. An estate planning attorney is key to making sure you have everything covered, up-to-date, and in compliance with the law.

 2. Take Time to Consider a Personal Representative. If you pass away without naming a personal representative or an executor, the court will appoint an individual tasked with distributing your assets. But if you name one, you can discuss this responsibility with them now, so that you answer all of his or her questions and you are confident that they can do the job.

 3. Create a Will or Let a Judge Give Away Your Estate. Remember that without a will, the assets in your estate will distributed by a probate judge according to the state probate process, which is not only expensive, but takes months and sometimes years to complete. There may be avoidable taxes that you could have dealt with in a will, as well as the opportunity to choose who gets what.

 4. Don’t Let Your Estate Plan Grow Moss! The article advises you to review your estate plan on a regular basis, like every couple of years. Also, talk with your estate planning attorney if you experience some sort of major life event, such as the birth of a child or grandchild, a death in the family or of one of your heirs, marriage or divorce, or a move to a different state.

Robert A. Gordon of Redkey Gordon Law Corp is a qualified estate planning attorney that has the experience to assist you with other strategies to lower your tax liability and the expenses of probate. This will give you and your family peace of mind and prevent some of the stress that will happen at your passing.

 Reference: Saint Paul Pioneer Press (June 28, 2015) “Your money: Wealthy or not, you need an estate plan”

Fundamentals of Estate Planning: The Generation-Skipping Transfer Tax

Of all the hated taxes in the U.S. tax code, the estate tax is handily the single most hated tax, particularly among wealthy families who must pay it. In an effort to preserve wealth across generations, these families rely on the use of complex strategies to transfer wealth to grandchildren, great-grandchildren and other descendants.  The Generation-Skipping Tax, or GSTT, was created by Congress specifically to close the perceived loophole.

 

In “Generation-Skipping Tax: What It Is and How to Avoid It,” The Motley Fool explains the idea behind the GSTT: general estate tax principles say that most people leave money to their spouses first, then to their children if they have any, then to grandchildren, and then to more distant descendants. The estate tax allows an unlimited deduction for marital gifts. However, in the children's generation, typically there is a tax. And when the child passes away, the IRS takes another bite by taxing the grandchildren.

 The GSTT levies a second tax on gifts made to grandchildren or those who are more than 37½ years younger than the person making the gift or bequest. This is to make sure those gifts are treated consistently with the policy behind the estate tax. The GSTT applies the same 40% tax rate to gifts that the regular estate tax applies to direct inheritances. In effect, the GSTT lines up the tax liability so that the grandchildren receive the same amount of assets as they would have if their inheritance had come straight from their parents instead of their grandparents.

 The article explains that outright gifts to grandchildren, called “direct skips,” are typically subject to GSTT, but the tax can also apply in more complex scenarios. “Indirect skips” occur when a trust that is created for multiple generations begins to see vested interests held by grandchildren and distant relatives. In such a case, the GSTT can become due— not only when a trust is set up—but also years or even decades later when remote relatives find themselves primary beneficiaries.

 Lastly, there are also instances where a person can make what would otherwise be a generation-skipping gift without treating it as one for the taxes. The article notes that the most common is the "deceased parent" rule, which makes sense in normal estate planning. Most people will leave an equal amount to each of their children when they pass away; however, if one child dies before them, they will usually assign that share to that child’s children. Thankfully, the GSTT doesn’t disrupt this logical gift to the grandchildren when their parent has already passed away at the time of the gift.

 Because the generation-skipping tax is about the scariest parts of estate tax law, most folks like to steer clear of it if they can. Speak with Robert A. Gordon of Redkey Gordon Law Corp, an experienced estate planning attorney, to find out more about the GSTT and other tax-decreasing strategies.

 Reference: The Motley Fool (June 28, 2015) “Generation-Skipping Tax: What It Is and How to Avoid It”

Whitney Houston’s Daughter’s Boyfriend is Already Facing Estate Plan Troubles

  Nick Gordon may feel like he has a target on his back and with good reason.  The boyfriend of Bobbi Kristina Brown, daughter to the world-class performer Whitney Houston, will never see the 22-year-old again. Tragically, Bobbi Kristina is being cared for in a Duluth, Ga., hospice after suffering major head trauma.  Gordon has been banned from visiting her, and is also being sued for millions by court-appointed conservator Bedelia Hargrove. According to the lawsuit, Gordon is alleged to have severely beaten Bobbi Kristina on the day she was found and leaving her alone after the beating.  She is unlikely to ever recover, having suffered extensive brain damage from the attack. To add theft to injury, Gordon is accused of stealing thousands from Bobbi’s bank account during the last five months.

 The USA Today’s article titled, “Lawsuit start of big trouble for Nick Gordon,” asks “why is this guy being sued?”

 It appears that his suspect reputation and lying are giving the family of Whitney Houston’s comatose daughter the idea of bringing an action against him in an effort to keep him from claiming a piece of Bobbi Kristina’s million dollar estate.

 In the past, Nick Gordon has claimed that he was “informally” adopted by Whitney and that he’s also Bobbi Kristina's husband, which would make him a family member with legal rights.

 Attorneys for the family say there is plenty of evidence to show that neither claim is true. Gordon has said nothing, including anything about what happened to Bobbi Kristina before she was found face down and unresponsive in her bathtub in January, similar to her mother's bathtub death three years ago.

 The article reports that law enforcement officials in Georgia have not determined if they will bring charges against Gordon, but the case is still under investigation. Nonetheless, without any criminal charges, Bobbi Kristina's conservator is claiming in civil court that Gordon is a liar, a thief, a batterer—maybe even a killer. The conservator was appointed by a state family court to protect Bobbi Kristina's assets while she is incapacitated. The court papers claim that Gordon was at one point accused of making threats and was under a restraining order to stay away from Bobbi Kristina's relatives.

 Bobbi Kristina is worth millions from the trust Whitney established for her in her will. However, the remainder of Whitney’s sizable estate goes to Bobbi when she turns 30. If Bobbi dies before that, Whitney’s will dictates that those millions revert to the Houston family. Although that scenario may set up a fight between the Houstons and Browns, both sides agree that Gordon should get nothing.

 This is a proactive move, the article says, because the family is concerned that Gordon will claim he's entitled to some piece of her estate. But Bobby Brown said that Gordon was never married to Bobbi Kristina, and common-law marriage is not recognized in Georgia. Nonetheless, the family might just settle with him to make him go away.

 Have a similar situation? Contact Robert A. Gordon of Redkey Gordon Law Corp, an experienced estate planning attorney, for help with your situation.

Reference: USA Today (June 28, 2015) “Lawsuit start of big trouble for Nick Gordon”

Supreme Court’s Ruling on Same-Sex Marriage – Impact on Taxes, Estate Planning

In the Supreme Court decision Obergefell v. Hodges, the constitutional right to same-sex marriages in all 50 states was affirmed.  Tax, estate planning and employee benefit opportunities in the 13 states that previously did not permit same-sex marriages are now legal.  The ability to claim state income tax refunds, the elimination of having to pay state estate taxes on the passing of the first spouse and ability to obtain spousal health insurance benefits are just a few of the changes to come.

 Forbes responded to the recent Supreme Court ruling with a very thorough article titled “Tax, Estate Planning, Benefits Opportunities After Supreme Court's Same-Sex Marriage Decision” that describes its effect and the ramifications. Here are a few of the important changes that the Obergefell ­decision will have on tax and estate planning:

 Income Taxes. Married same-sex couples will now be able to file joint state income tax returns. This usually means lower taxes than for two people filing individual returns. The article notes that the changes apply retroactively to open year tax returns. As a result, those couples who were married out-of-state should file for refunds for past years.

 Gifts. One notable benefit of married status is that an individual can make unlimited gifts to their spouse without any federal or state gift tax liability. There are no federal gift tax bills now for same-sex couples buying a house. Now if they purchase a home together, even if each contributes a different amount towards the purchase price, they own the home jointly without gift tax issues.

 Estate Planning. The Supreme Court’s decision means that same-sex couples can make use of the spousal exclusion in their estate planning. This lets spouses leave one another property without paying estate taxes when the first spouse passes away. A ruling last year gave the federal right to same-sex couples, and last week’s case extended it to the state level. Intestacy laws also now apply to married same-sex couples: they will be able to inherit property in the event that a spouse dies without a will.

 Divorce. There are now no issues of support rights with same-sex marriages recognized. Also, where same-sex couples can get divorced isn’t an issue, as every state will grant a same-sex divorce.

 IRA rollovers. The article advises to check IRA beneficiary designation forms, because when a spouse inherits an IRA, there’s a special exception that permits a surviving spouse to immediately take distributions until age 70½. This will stretch out the tax deferred payments over the surviving spouse’s lifetime and reduce federal and state income taxes.

Ask Robert A. Gordon of Redkey Gordon Law Corp, and experience estate planning attorney for more information.

 Reference: Forbes (June 26, 2015) “Tax, Estate Planning, Benefits Opportunities After Supreme Court's Same-Sex Marriage Decision”

How To Avoid Elder Financial Fraud and Abuse

Fraud cases involving elderly clients are on the rise, with nearly half of the CPA financial planners who participated in the survey, around 47%, saying they have seen an increase in financial fraud in the last five years.

 

According to a recent On Wall Street’s article, titled “Elder Fraud: 9 Tips to Protect Clients,” there are two reasons for this increase. One is the fact that fraud is more likely to be reported these days with greater awareness in our country. Also, retiring baby boomers haven’t all been the most tech-savvy—scammers see them as easy targets with sophisticated frauds to steal their money.

 The AICPA survey showed that the elderly are being scammed via phone and online scams, capitalizing on their inability to say no and falling victim to confusing or too-good-too-be-true representations. Here are some tips from the survey that elderly individuals can use to protect themselves:

• Create your financial plan and review it twice a year. Your estate planning attorney can help you make sure that the assets on hand are the same as what is detailed in the plan.
• Have a System of Checks and Balances. Contact information regarding your support team should be given to your estate planning attorney. These include bankers, accountants, clergy, and any designees with authority over health-care concerns, as well as family members and loved ones. Fraud is stifled with open communication among the members of the team, so that others are aware of actions and decisions.
• Communicate regularly. The article reminds people that it’s important to communicate any changes in their situation to their estate planning attorney.
• Allow your estate planning attorney to speak with family members. It is helpful to have your estate planning attorney be able to talk to family members or a professional on      your team. Again, communication is important and can help recognize and stop fraud from occurring.
• Designate a co-trustee. This will help prevent an unscrupulous family member from taking advantage of an elderly individual by imposing their will and signing away their assets. The article suggests that if this is an issue, talk to an estate planning attorney about a revocable living trust and assigning a co-trustee for the account.
• Require double signatures for larger dollar amounts. This is a great way to make sure that a large chunk of money doesn’t walk out the door without your say-so. Thus, the reason for a co-trustee: to ensure that all checks are reviewed and approved by the co-trustee if more than a pre-determined amount. This can help reduce the risk of fraud, the article      advises.

 These are but a few examples. Robert A. Gordon of Redkey Gordon Law Corp, an experienced estate planning attorney, can help you with other strategies and techniques to help prevent financial fraud and exploitation.

 Reference: On Wall Street (July 1, 2015) “Elder Fraud: 9 Tips to Protect Clients”

How to talk about dying...

http://opinionator.blogs.nytimes.com/2015/07/01/how-to-talk-about-dying/?smprod=nytcore-iphone&smid=nytcore-iphone-share

 

A guide that asks about what matters to you, not what’s the matter with you.

How Will California Be Able to Help Seniors?

By the end of 2015, it is expected that 5.1 million persons age 65 and over will make their homes in California.  Add aging baby-boomers to the state’s current migration patterns and it is entirely likely that the state will be home to more than 8.4 million seniors by 2030.  A recent report by the Senate Select Committee on Aging and Long Term Care, A Shattered System: Reforming Long-Term Care in California adds clarity to what may become a massive fiscal challenge for the state and its senior residents: “Reliance upon our existing patchwork of programs and services to serve our growing aging and disabled population will result in unnecessary expenditures, inequitable access, and irrelevant services.”

California is trying to make progress in improving the services available to its growing senior population, according to an article in The (Crestline CA) Alpenhorn News titled “Legislative protection for seniors”.

California passed AB 1899 last fall, which required any licensee found to have abandoned residents of a residential care facility to be permanently banned from operating facilities in the state. Also, California legislators passed AJR 29 in 2014. This bill asked for the restoration of federal funding for senior nutrition programs that was reduced by federal cuts, as well as to exempt these programs from future budget cuts. The federal government’s reply to this request is stalled.

Now the state’s legislators are considering AB 1122, the “Excluded Persons Administrative Action List,” or “EPAAL” legislation. It requires the state’s Department of Social Services, Community Care Licensing (DSS/CCL) to publish online all persons who are excluded from owning, operating, and/or working inside any licensed care facility as a result of an Administrative Law proceeding. The article notes that right now there’s no mandatory requirement for DSS/CCL to refer elder neglect, abuse, or other egregious behaviors against seniors residing in assisted living facilities to law enforcement, so very few of these crimes are prosecuted. But through Administrative Law proceedings, DSS/CCL can permanently or temporarily prohibit a person from working in a licensed care facility.

The current bill is supposed to provide convenient, online access to EPAAL, allowing everyone to verify that caregivers and the employees don’t have a prior history of behaviors which endangered the health or safety of a senior.

Contact Robert A. Gordon of Redkey Gordon Law Corp, an experienced elder law attorney, to find out more.

Reference: The (Crestline CA) Alpenhorn News (June 19, 2015) “Legislative protection for seniors”

The State of Kansas Teams Up Resources to Prevent Elder Abuse

In a new and dynamic partnership, The Office of the Kansas Securities Commissioner (KSC), the Kansas Department for Children and Families (DCF) and the Kansas Department for Aging and Disability Services (KDADS) has chosen this week to recognize World Elder Abuse Awareness Day (WEAAD). WEAAD is a global program created by the International Network for the Prevention of Elder Abuse and the World Health Organization. The primary goal is to provide people around the world with the knowledge and awareness necessary to prevent elder abuse in their communities.

Elder abuse comes in many forms, The Hays (KS) Post explains in a recent article titled “Agencies encourage Kansans to help prevent elder abuse in their communities.” There can be physical, financial, emotional, neglect, or abandonment, with several types of abuse often inflicted at the same time. Financial abuse is considered to be the most common form of abuse to elders, and costs its victims $2.9 billion a year.

Investment fraud is an area of concern because the victims can have their life savings wiped out with little or no opportunity to recover. Investment fraud can come in many forms, the article warns. The investment might be deceptive on its face, or it could be a legitimate product or service that’s unsuitable for the senior’s situation. Other investment problems include unregistered products, theft of funds, and products sold by an unlicensed adviser or broker. Investors and caregivers are urged to “investigate before investing” and to call the KSC at (785) 296-3307 to verify if the product and person selling it are legitimate and whether there’ve been any complaints.

Studies show that family members and caregivers are guilty of elder abuse in more than half of these cases. Anyone can, and should, report abuse of an elderly person in any of its forms—physical, emotional or financial. Isolation, loneliness and poor health can put elders in a situation of being at greater risk for these scams.

The DCF has really ramped up its focus on fiduciary abuse over the past few years and has a staff auditor dedicated to pursuing financial exploitation of vulnerable citizens with the help of law enforcement.

“It is the responsibility of every Kansan to report suspected abuse,” DCF Secretary Phyllis Gilmore said. “We strive to work closely with law enforcement and other agencies to protect vulnerable adults.”

Find out about California laws by contacting Robert A. Gordon of Redkey Gordon Law Corp, an experienced elder law attorney.

Reference: The Hays (KS) Post (June 20, 2015) “Agencies encourage Kansans to help prevent elder abuse in their communities”

How Will YOU Define Your Legacy?

Unlike previous generations, the baby boomers are more concerned with having enough money to last through their retirement years than with leaving substantial assets to their heirs and to charities.  But they are still concerned with leaving a legacy for their children and grandchildren.  A new definition of a legacy is not based on dollars, but on family memories and shared values.

Money isn’t the only definition of legacy, according to the US News article titled “How Boomers Are Redefining 'Legacy.’” Baby boomers realize that their top priority is to have enough assets to support themselves, but are starting to redefine “legacy” in the process. For some individuals, it means giving away some money now. For others, it’s restructuring some assets to leave a financial inheritance. For most, the process of aligning their assets with their priorities means the opportunity to create non-financial legacies.

Rethink how you label the financial help you're giving now to your next generation. Are you helping them out with college tuition? Helping with the living expenses of a slow-to-launch millennial by having them stay at home or by covering some bills is not uncommon. About 62% of Americans 50 and older are providing financial support to family members, according to a recent study. The study found that the subsidies averaged $15,000 over five years, but also increased with the givers’ resources. You’re allowed to give away $14,000 per recipient, per year, without triggering any tax penalties or disclosures … more than that and the person who gives has to complete a gift tax return. Also, the gift tax is deducted from your lifetime cap on tax-free gifting.

A 529 college saving plan lets grandparents build up provisions for a grandchild’s college education. Another way to redefine “legacy” is to set up your assets to guarantee that your heirs receive at least some type of asset. Be sure to distinguish legacy planning from estate planning, the article says. For instance, some families construct a legacy of memories and real estate by purchasing a vacation property held in a trust and owned equally by all heirs, keeping it intact for at least another generation. It also guarantees that the vacation home won’t automatically be sold as part of the estate.

A message to baby boomers: it’s really stories and family values children want from their parents—that’s what Boomers say they want from their aging parents. It’s likely that Generation X and millennials will want the same. Discussions about heirlooms with some market value but even greater sentimental attachment, like grandma’s gold wedding band, are great openings for conversations about the values that are important to the family.

Consider legacy letters that convey your own priorities, point of view, and life lessons for future generations. This gives you the chance to talk about the document. It’s a good way to redefine “legacy.”

Need Additional information? Contact Robert A. Gordon of Redkey Gordon Law Corp, an experienced estate planning attorney.

Reference: US News (June 18, 2015) “How Boomers Are Redefining 'Legacy'”