Perlin Estate Planning

Why You Must Have a Family Meeting Regarding Your Elderly Loved Ones

No communication is bad communication. So regardless of how hard certain “talks” can be, there are some that you do not want to ignore. When you need to discuss caring for elderly parents, the conversation is crucial for their health and future.

Is it time for a family meeting, or a family huddle, or one serious conversation – whatever you choose to call it – about your elderly parents, their finances and their estate planning?  How do you go about having “the talk” successfully? There are some basic principles worth noting, as reviewed in a recent article in The Wall Street Journal titled “When It's Time to Huddle.”

 

If you do not have time to read the original article, here are the bullet points to ponder:

·         Be Inclusive,

·         Don’t Delay,

·         Hire a Professional Referee,

       ·         Set an Agenda in Advance, and

·         Tap Long-Distance Relatives.

 

For more information, please visit my Web site.

Estate Planning Does Not End at the “Unified Credit”

What is a “unified credit,” and how does it affect your estate plans?

Forbes recently shed some light on this topic; the Forbes article, titled “The Unified Credit Freeze, Not the Philly Freeze” is one you may want to keep.

If you are not familiar with the term “unified credit,” it is the federal tax exclusion given to every taxpayer for use against gift and estate taxes.  You get one “unified” exemption amount to be applied in life against lifetime gift taxes, at death against the dreaded estate tax, or against some of each.

At present, the credit is pegged at a fairly nice $5.25 million, or $10.5 million for married couples. While this is cause for celebration for most taxpayers, whether married or single, there still is estate planning to be done.

The article addresses “traditional” estate planning for married couples through revocable living trusts, which then create “credit shelter trusts” and “marital trusts” upon the death of the first spouse. The article does not address the new “portability” option for estate tax minimization.

The basic teaching point of the article is to follow through on your estate planning and to not become complacent, especially if your overall marital estate exceeds the exclusion amount. Unpleasant and otherwise avoidable estate taxes could be triggered.

For more information, please visit my Web site.

Collecting Social Security Benefits From Your Ex-Spouse

There are several new challenges today’s retiring generation is facing, with the volatility of Congress and the uptick of healthcare costs. You can also add “divorce” to those challenges, and those retirees are experiencing some surprises in regards to their Social Security benefits.

If you have been divorced, it is critical that you understand how Social Security benefits take divorce into account. Demographically speaking, this is even more essential for retiring women.

The role of Social Security benefits in the retired life of a divorcee can be crucial, as discussed in a recent Reuters article titled “Column: Knowing Social Security rules can help divorced spouses.”

Social Security payments are related to your paid work during your working years. As a result, many ex-spouses simply have not built up sufficient “numbers” because of how household incomes were split back in the day. Interestingly, you may be eligible for many of the same benefits as if you had remained married to your former spouse.

Here are some threshold requirements:

·         You must be currently single,

·         You must have been married to your former spouse for at least 10 years,

·         Your divorce must be “final” for at least two years,

·         You must have reached the minimum Social Security eligibility age (62), and

·         You must not be currently collecting a benefit amount greater than that of your former spouse.

Note: Your eligibility is completely independent of the benefits collected by your former spouse, but you will lose the benefits if you remarry. I recommend reading the original article for additional tips and traps.

For more information, please visit my Web site.

Tax Savvy Financial Tools in the Form of Life Insurance and Annuities

Many financial products are created with the intention of easing your fears about the future financial health of your loves ones and a means to retire. Two increasingly popular financial products on the market today are life insurance and annuities.

Turns out these products may be tax savvy, too - but are they right for you?

You really need to do your due diligence when it comes to life insurance and annuities. A recent article in The New York Times titled “Getting the Full Picture on Annuities and Insurance” points out the obvious; both of these products are heavily marketed. Beyond the hype, much of the marketing focuses on their tax savings characteristics.

Can these tools be tax savings devices? Indeed, if placed within a solid overall plan. Nevertheless, it is important not to lose sight of the true purpose behind these products and the cost-benefits of any particular policy.

 

At the very least, it would be worth your time to read the original article. It will help you understand how powerful these products can be, how you can use them, and where they might fit into an overall plan.

For more information, please visit my Web site.

 

 

Talking About Finances With Elderly Parents

Fidelity Investments specifically suggests that mothers are the best source of open dialogue, even when it comes to the “money talk.” In fact, MarketWatch recently considered this in an article titled “In family-money talks, start with mom.”

A summary of the numbers from that article:

In the survey of 975 parents and 152 adult children, 64% of mothers said it was “not at all difficult” to start a conversation with an adult child about their finances; only 54% of fathers felt the same way. In addition, 79% of women, versus 69% of men, reported having had “comprehensive discussions” with their adult children about estate planning or wills.  The same was true of 66% of women vs. 56% of men about health and elder-care topics and 70% of women vs. 55% of men about running out of money in retirement.

Although there are many reasons why moms might be the best to approach, most of them are mere conjecture. More important, however, is the reality that senior parents really do not enjoy talking about their finances. That is understandable.

All that noted, “the talk” needs to be had, sooner rather than later.

 

For more information about financial planning for the elderly, please visit my Web site.

Be Your Own Bookkeeper When Caring for Elderly Parents

If you find yourself taking on the responsibility of a caretaker to your elderly parents, are you documenting your efforts? If you are giving time and money for the care of loved ones and would like to take tax deductions for your efforts, you ought to make sure you brush up on your bookkeeping skills. Otherwise, when it comes to tax time, you may be out of luck (and money).

The case of Estate of Olivo v. Commissioner is most instructive.

Forbes examined the Olivo case in an article titled “Mother's Day? Son Claims $1.2M Tax Write-Off For Helping Mom.” From the title of the article, it is clear that the son may have been a bit generous in his claim. To make matters even more interesting, the son was a tax attorney.

Background: Anthony Olivo took nearly ten years away from his law practice to care for his parents. Accordingly, Anthony lost his law practice income. However, he did collect fees from his parents for managing their estates. When Anthony’s mother died, he sought to deduct $44,200 in administrator’s fees, $55,000 in accountant’s and attorney’s fees, and a whopping $1,240,000 for a near-decade’s worth of lost wages (he did manage his own firm, after all).

The IRS took a look at his documentation of all of these fees and amounts – but there was no contract for services, no invoices, and no evidence. Even when Anthony was handling the estate and filing the tax return, he did not keep track of his time.

In reality, not everything claimed may have been deductible. Nevertheless, the lack of recordkeeping killed any chance for success in claiming the deductions.

If you and your loved ones are entering a period of caregiving, then a little forethought and planning can go a long way. In the end, a little recordkeeping can be the deciding factor in making your claim.

 

For more information about estate planning and long-term care, please visit my Web site.

Hospice Still Waiting on Help from Medicare

U.S. health care has been in flux since 2010, with many aspects of health care reform still on hold. Hospice is one area that is still waiting for help with protecting the elderly and those in need of end-of-life care.

As reported quite recently through the Kaiser Health News, hospice care has yet to be expanded under the Medicare project set out three years ago.

The article titled “Medicare Lags In Project to Expand Hospice” examines the very real conflict between “curative” treatment and “palliative” treatment. The former is meant to cure a condition and thereby prolong life, and the latter is meant to ease the pain caused by a condition without a focus on effecting a cure.

Naturally, the curative and palliative treatments are often considered opposites. In fact, choosing palliative care would mean giving up all hope on curative care. Consequently, it is only natural that rapidly declining patients delay their entry into palliative hospice care.

The 2010 law was to begin inroads into exploring combined care, the possibility of both curative and palliative concurrently. Logically, this should ease transitions without forsaking hopes, likely reducing costs in the process.

For more information about Medicare and Medicaid planning, please visit my Web site.

Beware of State Death Taxes

Congress recently made “permanent” a generous $5.25 million estate and gift tax exclusion amount. However, there are still some states that impose their own death taxes.

Consider Connecticut, a state that enjoyed a banner year for death tax collections. As reported by The Hartford Courant in an article titled “Inheritance Windfall: Record-Breaking Year For Estate Taxes Helps Fuel Budget Surplus,” the tiny Nutmeg State raked in an unprecedented $428 million in inheritance taxes.

If you reside in Florida or in another state that does not impose its own death tax, watch out. As state budgets continue to get squeezed, death taxes may become more appealing to your state legislators.

For more information about estate tax planning, please visit my Web site.

An Inherited IRA Still Requires an RMD

The Slott Report recently addressed the consequences of a surviving spouse inheriting the IRA of their deceased spouse after both spouses have reached age 70 ½, the age at which IRA Required Minimum Distributions (RMDs) must be taken. The article titled “Inherited IRA: When do You Own It?” noted that one must be very careful in these scenarios.

To begin, the inheriting spouse must be a “designated” beneficiary. Assuming that is the case, what happens when one spouse dies in December and has not withdrawn the required RMD? How does the surviving spouse, as a designated beneficiary, calculate their RMD for that year?

RMDs are always tricky because the penalties are steep, with a 50% penalty tax on the amount required but not taken.

For more information about IRA taxation, please visit my Web site.

Don’t “Escheat” Your Family Inheritance

Without proper estate planning, your assets may escheat to your state’s treasury by default.

At the very least, a proper will can avoid legal landmines like the escheat rule.

Basically, an estate can sit idle for only so long before it gets swallowed up by the state where the decedent last resided. Consider the case of Roman Blum in New York, as reported in a recent Forbes article titled “N.Y. State Could Get $40 Million From Man Who Died Without A Will.” You can read all of the details in the original article, but Mr. Blum likely did not intend the State of New York to benefit from his life’s work as a real estate developer.

Here are the lessons to take away from this case:

1.      Plan for your loved ones. If you do not execute at least a basic will, your state’s laws of intestacy may apply. To see what would happen in your state, visit the free, interactive website mystatewill.com.

2.      Review beneficiary forms. Many assets are transferred via designations on beneficiary forms – including retirement accounts, life insurance policies, and even some bank accounts. Review these forms regularly, and be sure to keep them up-to-date.

3.      Benefit charities. Some people refer to this as the “bomb” clause, stating that should your entire family be wiped out in a single incident, your assets should be distributed to specific charities.

4.      Sign documents to protect yourself. Someone needs to make important decisions for you when you cannot do so for yourself. With legal documents like health care directives and powers of attorney, you can appoint those you trust to act on your behalf.

5.      Make documents accessible. Make sure your legal documents can be found. It won’t matter how many documents you’ve signed if no one can find them.

6.      Do not procrastinate. Apparently, when Mr. Blum was ailing, he had finally agreed to sign the necessary documents, but passed away before getting it done.

 

For more information, please visit my estate planning Web site.