Life Insurance can help Women with Estate Planning

June 6, 2022

The 2021 Insurance Barometer Survey revealed that 43% of women believe they would leave their families in a difficult financial situation, if they were to die prematurely. This is five percentage points higher than the men who were surveyed. While the need for planning for both women and their families are present, women aren’t satisfied they have done an adequate job when making certain that their goals are met and their families will be financially secure. Life insurance can help women with estate planning.

Insurance News Net’s recent article entitled “How Life Insurance Might Solve Women’s Estate-Planning Issues” says that women face unique planning challenges, like the fact they only earn about 82.3% compared to their male counterparts’ earnings, the U.S. Department of Labor reports. Lower earnings add to the difficulty of saving adequately for retirement. A recent Prudential survey found that only 54% of women have saved for retirement, with an average savings of $115,412, versus 61% of men, with an average savings of $202,859.

Women must also frequently care for generations of family members. In addition to caring for children, 75% of in-home care providers for older people are women, most often daughters, according to the American Association for Long-Term Care Insurance. These seniors are often financially dependent on their female caregivers, so a woman may find herself supporting herself, a spouse or partner, her children and her aging parents. Planning for the continued care of these dependent family members is critical, if a woman is unable to continue in her role.

There is also the fact that women, on average, have longer lifespans than men. For women who are either married to or partnered with a man, this means a greater likelihood that the woman will be widowed later in her life. Women, on average, may need care for more extended periods than men during their later years. These expenses could substantially deplete the assets women plan to leave their families at death.

Life insurance can help protect families in a tax-advantaged way, while also providing income for retirement or benefits for long-term care. A life insurance death benefit can provide liquidity to care for multiple generations of dependent family members. If that policy builds cash value, as the need to care for family members eventually wanes, the owner can use the cash value for additional income in retirement. Some policies can provide funds for long-term care, if the need arises. Even a single policy can address all three planning concerns.

Speak with an estate planning attorney about the way that life insurance can help women with estate planning. If you would like to learn more about estate planning for women, please visit our previous posts.

Reference: Insurance News Net (March 9, 2022) “How Life Insurance Might Solve Women’s Estate-Planning Issues”

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Latest Ways to Prevent Dementia

June 3, 2022

Protecting brain health and cognitive functioning as we age is crucial. The CDC estimates that 5.8 million people in the U.S. are now living with dementia. With that figure only getting larger, many recent studies have been focused on understanding what causes the condition, as well as the latest ways to help prevent dementia. One recent study looked at the relationship between cognitive decline and something you may already have at home.

Best Life’s recent article entitled “Having One of These at Home Helps Prevent Dementia, New Study Says” reports that research shows different foods and drinks can either increase or mitigate your risk of dementia.

A recent study, for example, found that vitamin K has the potential to improve cognitive abilities in aging brains. A number of forms of this vitamin are found in leafy green vegetables, fermented foods, some cheeses, meats and fish. Research suggests that getting optimal daily doses may help protect your brain in the future.

Another new study found that having a pet at home could have positive effects on your cognitive health. The findings from a recent study suggest they could actually help slow rates of cognitive decline. Preliminary data were presented at the American Academy of Neurology (AAN) meeting earlier this month, outlining how “sustained relationships with companion animals” could help keep your brain healthy.

“Prior studies have suggested that the human-animal bond may have health benefits, like decreasing blood pressure and stress,” said study author Tiffany Braley, MD, MS, associate professor of neurology at the University of Michigan Medical Center, said in a press release. “Our results suggest pet ownership may also be protective against cognitive decline.”

Richard Isaacson, MD, director of the Alzheimer’s Prevention Clinic in the Center for Brain Health at Florida Atlantic University’s Schmidt College of Medicine, echoed this when speaking with CNN about the findings. According to Isaacson, who was not affiliated with the study, owning a pet or multiple pets integrates “core components of a brain-healthy lifestyle.”

“Cognitive engagement, socialization, physical activity and having a sense of purpose can separately, or even more so in combination, address key modifiable risk factors for cognitive decline and Alzheimer’s disease dementia,” he told CNN.

The study looked at the cognitive data from 1,369 adults over the age of 50 from a University of Michigan Health and Retirement Study. The participants had an average age of 65 years and normal cognitive skills when the study started. Over 50% of the participants owned pets, and of those, 32% were long-time pet owners (owing pets for over five years).

Researchers found that pet owners’ cognitive composite scores decreased at a slower rate, when compared with non-pet owners. The results were stronger for long-term pet owners, whose average scores were 1.2 points higher than non-pet owners at the six-year mark. Demographics seemed to have an impact. Pet owners generally had higher socioeconomic status, when compared with non-pet owners. Researchers also found that college-educated adults, Black adults and men who were long-term pet owners had even more prominent cognitive benefits.

While researchers couldn’t definitively say why long-term pet ownership had the best effect, according to Braley, having a pet may help mitigate stress and keep you moving—both of which aid in keeping your brain healthy.

“As stress can negatively affect cognitive function, the potential stress-buffering effects of pet ownership could provide a plausible reason for our findings,” Braley stated in the AAN press release. “A companion animal can also increase physical activity, which could benefit cognitive health.”

He noted that additional research is needed to confirm the most recent findings. These are just a few of the latest ways to help prevent dementia. If you are interested in learning more about dementia, and other cognitive conditions, please visit our previous posts.

Reference: Best Life (April 26, 2022) “Having One of These at Home Helps Prevent Dementia, New Study Says”

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Avoid Family Disagreements over Caregiving

June 2, 2022

Taking care of a loved one can be all consuming and taxing to family relationships. According to the “Caregiving in the U.S. 2020” report by AARP and the National Alliance for Caregiving, “about one in five caregivers report experiencing high financial strain as a result of providing care.” This is especially true for those involved in high-intensity caregiving for over 21 hours a week, who often deplete their savings and go into debt. However, there are steps you can take to avoid family disagreements over caregiving.

AARP’s recent article entitled “How Caregivers Can Stop Arguing About Money” says caregiving-related money conflicts are only partially about dollars and cents. Some are predicated on differences in priorities:

Should the family’s finite resources be directed to the care recipient or spread among all family members?
Should the cost of something like a front door ramp for a parent’s house be borne equally by all the adult siblings or solely by the primary caregiver who lives with that parent?
Should a declining parent give all her assets to the adult child committed to caregiving or divide them among her children?

Caregivers, care recipients and other family members may have different answers to such questions and then can get into heated discussions. This can mean hard feelings that can destroy family relationships during the caregiving years and beyond. Here are a few ideas on how to avoid such conflicts:

One strategy to help caregiving families avoid constant financial conflict is to handle little and big questions differently. For the little decisions that need to be made every day, such as which pharmacy to use, family members should defer to the primary caregiver’s judgment. However, for more consequential decisions like selling the family home to help pay for a parent’s nursing home care, all family members should feel their opinions are sought out and respected. It is typically the family members who feel like their voices aren’t heard, who protest the most loudly and cause the fiercest debates.

If caregiving family members still can’t find a way to stop arguing about money, then they should consider meeting with a member of the clergy, a family therapist, or elder mediator. A pro is trained to manage emotions, clarify points and frame acceptable compromises. They can help avoid further disagreements over caregiving that can cause damage to already damaged family relationships. If you would like to learn more about caregiving, or long-term care facilities, please visit our previous posts.

Reference: AARP (Feb. 8, 2022) “How Caregivers Can Stop Arguing About Money”

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Conducting an Estate Inventory is Vital

June 1, 2022

When a loved one dies, it may be necessary for their estate to go through probate—a court-supervised process in which his or her estate is settled, outstanding debts are paid and assets are distributed to the deceased person’s heirs. An executor is tasked with overseeing the probate process. An important task for an executor is submitting a detailed inventory of the estate to the probate court. Conducting an estate inventory is vital to ensuring your probate is not problematic.

Yahoo Finance’s recent article entitled “What Is Included in an Estate Inventory?” looks at the estate inventory. During probate, the executor is charged with several duties, including collecting assets, estimating the fair market value of all assets in the estate, ascertaining the ownership status of each asset and liquidating assets to pay off outstanding debts, if needed. The probate court will need to see an inventory of the estate’s assets before distributing those assets to the deceased’s heirs.

An estate inventory includes all the assets of an estate belonging to the individual who’s passed away. It can also include a listing of the person’s liabilities or debts. In terms of assets, this would include:

Bank accounts, checking accounts, savings accounts, money market accounts and CDs
Investment accounts
Business interests
Real estate
Pension plans and workplace retirement accounts, such as 401(k)s, 403(b)s and 457 plans
Life insurance, disability insurance, annuities and long-term care insurance
Intellectual property, such as copyrights, trademarks and patents
Household items
Personal effects; and

Here’s what’s included in an estate inventory on the liabilities side:

Home mortgages;
Outstanding business loans, personal loans and private student loans;
Auto loans associated with a vehicle included on the asset side of the inventory
Credit cards and open lines of credit
Any unpaid medical bills
Unpaid taxes; and
Any other outstanding debts, including unpaid court judgments.

There is usually no asset or liability that’s too small to be included in the estate inventory. Working closely with an estate planning attorney to make sure you are conducting an estate inventory is vital to a smooth probate process. If you would like to learn more about probate, please visit our previous posts.

Reference: Yahoo Finance (Feb. 15, 2022) “What Is Included in an Estate Inventory?”

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Benefits of Pre-Planning Your Funeral

May 31, 2022

Yahoo Life’s recent article entitled “Should You Pre-Pay for Your Own Funeral as Part of Estate Planning?” says there are major benefits to pre-planning and even pre-paying your funeral now—no matter what your age or health status.

Most deathcare professionals agree that funeral pre-payment has valuable benefits for people of all ages and health statuses.

A major benefit to pre-planning and pre-paying is the emotional support and relief they offer family members and friends.

Maggie McMillan, vice president of the Los Angeles-based Wiefels Group and All Caring Solutions Cremation and Funeral Services, explains that “if and when the unexpected happens, you want everyone to already know what your wishes are, because that will make it easier when hard emotions inevitably come up after you are gone.”

Knowing that your family is prepared and taken care of with prepayment can also help alleviate your own stress and better your mental health.

Additional benefits of pre-planning for your funeral are that, depending on what method of pre-payment you get, you can often lock in a price guarantee on services and merchandise based on current pricing on the day that you plan. This can protect your family from industry inflation and price fluctuation.

Funeral costs double every decade, on average. Therefore, if you’re looking at pre-paying for a service that costs $3,000 today but didn’t pre-pay and pass away 10 years later, your fees might be upwards of $6,000 for the exact same service.

For some people, all aspects of pre-planning and paying may not seem the right option.

For instance, a plan that isn’t transferable to different states doesn’t make sense for individuals who move around frequently.

In that case, talking to loved ones about what your final wishes are (including where you’d like to end up, and the disposition method) would be a relief for them, in case the unthinkable happens.

Reference: Yahoo Life (Feb. 17, 2022) “Should You Pre-Pay for Your Own Funeral as Part of Estate Planning?”

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Documents You need if You become Incapacitated

May 26, 2022

There are documents you need if you become incapacitated. If advance planning has been done, your family will have the legal documents you need. Just as importantly, they will know what your wishes are for incapacity and end-of-life care. If there was no planning, your loved ones will have to start with a lengthy application to the court to have someone named a guardian. They are a person who has legal authority to make medical decisions on your behalf.

Having a plan in place beforehand is always better, explains the article “If I become incapacitated, who makes healthcare decisions?” from Waterdown Daily Times.

Another reason to have these documents if you become incapacitated: the court does not require the guardian to be a family member. Anyone can request a guardian to be appointed for another incapacitated individual, whether incapacity is a result of illness or injury. If no planning has been done, a guardianship must be established.

This is not an easy or inexpensive process. A petition must be filed, and the person in question must be legally declared incapacitated. In some cases, these filings are done secretly, and a guardianship maybe established without the person or their family even knowing it has occurred.

There are also many cases where one family member believes they are better suited for the task, and the family becomes embroiled in controversy about who should serve as the guardian.

The entire problem can be resolved by working with an experienced estate planning attorney long before incapacity becomes an issue. A comprehensive estate plan will include a plan for distribution of assets (Last Will and Testament), Power of Attorney, Healthcare Power of Attorney and a Living Will.

These last two documents work together to describe your wishes for end-of-life care, medical treatment and any other medical issues you would want conveyed to healthcare providers.

Unfortunately, the pandemic revealed just how important it is to have these matters taken care of. If you did create these documents in the last few years, it would be wise to review them, since the people in key roles may have changed. While the idea of being on a respirator may have at one time been a clear and firm no, you may feel otherwise now.

A Healthcare Power of Attorney is an advance directive used to name a person, who becomes your “agent,” to make healthcare decisions. If there is no Healthcare Power of Attorney, physicians will ask a family member to make a decision. If no family can be reached in a timely manner, the court may be asked to appoint a legal guardian to be the decision-maker. In an urgent situation, the physician will have to make the decision, and it may not be the decision you wanted.

The Living Will explains your wishes for end-of-life care. For instance, if you become seriously ill and don’t want a feeding tube or artificial heart machine, you can say so in this document. You can even state who you do and do not wish to visit you when you are sick.

The best advice if you become incapacitated is to have a complete estate plan, including these vital documents you need, created by an experienced estate planning attorney. If you have an estate plan and have not reviewed it in the past three to five years, a review would be best for you and your loved ones. If you would like to learn more about powers of attorney, please visit our previous posts.

Reference: Watertown Daily Times (April 14, 2022) “If I become incapacitated, who makes healthcare decisions?”

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Leaving Property in Trust is Common

May 25, 2022

A typical estate at death will include a personal residence. It’s common for a large estate to also include a vacation home, or family retreat. Leaving real property in trust is common.

Estate plans that include a revocable trust will fund the trust by a pour-over, says Kiplinger’s recent article entitled “Should You Own Your Home in Your Trust?”

A settlor (the person establishing a trust) often will title their home to the revocable trust, which becomes irrevocable at death.

Another option is a Qualified Personal Residence Trust, which is irrevocable, to gift a valuable home to a trust for the settlor’s children. With a QPRT, the house is passed over a term of years while the original owner continues to live there, so the gift passes with little or no gift or estate tax.

Some trusts arising from a decedent estate will hold the home belonging to the settlor without any instructions for its disposal or retention. Outside of very large trusts, a requirement to actually purchase homes for beneficiaries in the trust is far less common.

It is more common in a large trust to have terms that let the trustee buy a home for a beneficiary outside the trust or keep the settlor’s home in the trust for a beneficiary’s use, including purchasing a replacement home when requested.

The trustee will hopefully propose a plan that will satisfy the beneficiary without undue risk to the trust estate or exceeding the trustee’s powers. The most relevant considerations for homeownership in a trust are:

The competing needs of other trust beneficiaries
The purchase price and costs of maintaining the home
The size of the trust as compared to those costs
Other sources of income and resources available to the beneficiary; and
The interests of the remaindermen (beneficiaries who will take from the trust when the current beneficiaries’ interests terminate).

The terms of the trust may require the trustee to ignore some of these considerations.

Each situation requires a number of decisions that could expose the trustee to a charge that it has acted imprudently.

Leaving real property in trust is common and those who want to create a trust should work with an experienced estate planning attorney to avoid any issues. If you would like to learn more about managing real property in your estate planning, please visit our previous posts.

Reference: Kiplinger (Feb. 8, 2022) “Should You Own Your Home in Your Trust?”

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Have a Plan before You become Incapacitated

May 24, 2022

No one plans to be incapacitated, but life can – and often does – throw you a curve ball. Have a plan in place before you become incapacitated. If you became incapacitated and advance planning had been done, your family will have the legal documents you need. Just as importantly, they will know what your wishes are for incapacity and end-of-life care. If there was no planning, your loved ones will have to start with a lengthy application to the court to have someone named a guardian. They are a person who has legal authority to make medical decisions on your behalf.

Having a plan in place beforehand is always better, explains the article “If I become incapacitated, who makes healthcare decisions?” from Waterdown Daily Times.

Another reason to plan ahead: the court does not require the guardian to be a family member. Anyone can request a guardian to be appointed for another incapacitated individual, whether incapacity is a result of illness or injury. If no planning has been done, a guardianship must be established.

There are also many cases where one family member believes they are better suited for the task, and the family becomes embroiled in controversy about who should serve as the guardian.

These last two documents work together to describe your wishes for end-of-life care, medical treatment and any other medical issues you would want conveyed to healthcare providers.

The best advice is to have a plan in place, before you become incapacitated that is created by an experienced estate planning attorney. If you have an estate plan and have not reviewed it in the past three to five years, a review would be best for you and your loved ones. If you would like to read more about other important healthcare decisions, please visit our previous posts.

Reference: Watertown Daily Times (April 14, 2022) “If I become incapacitated, who makes healthcare decisions?”

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How Divorcing over Fifty effects Estate Planning

May 23, 2022

If you are and older couple considering a divorce, take care to consider how divorcing over fifty effects estate planning. According to the Pew Research Center, the divorce rate has more than doubled for people over 50 since the 1990s. The Pandemic is also adding to the uptick, says AARP’s recent article entitled “Getting Divorced? It’s Time to Update Your Caregiving Plan.”

A divorce can be financially draining. Moreover, later-in-life divorces frequently impact women’s finances more than men’s. That is because in addition to depressed earnings from time spent out of the workforce raising children, women find themselves more financially vulnerable post-divorce and more likely to serve as caregivers again in the future. Even so, for partners of all genders, it is important to consider the longer-term financial outlook, not just the financial situation you’re in when you are actually dissolving the marriage.

You and your spouse will be dividing assets and liabilities and the responsibilities regarding spousal support. How one of you will live if the other gets sick or passes away should also be part of this conversation.

Consider where you’ll need to make changes. One may be removing your spouse from beneficiary designations on all your accounts. (In some states, this is automatic.) Your divorce agreement may also include buying life insurance or maintaining a trust or beneficiary designations for one another.

Create or update your estate plan immediately. You should also ask your estate planning attorney to review your marital agreement. They will have suggestions about how to align your estate plan with your divorce obligations. If you and your ex are co-parenting children, your estate plan should address who their guardians will be, if both biological parents pass away. It is also important to address who will manage any inheritance, if you don’t want your ex-spouse handling assets you may leave to your children.

Create your life care plan, which means naming health care proxies or surrogates (who will take care of your medical affairs, if you’re in need of caregiving), designating a financial power of attorney (who will take care of your finances and legal affairs), and naming a guardian for yourself if you’re incapacitated.

Consider the way in which your divorce will impact your children and extended family if you need caregiving. At a minimum, agree between yourselves what level of contact you can manage and, if you share children and loved ones, know that your lives will cross along the way.

While your marriage may not last, the connections will, so make a wise plan. Your estate planning attorney will help advise you on how divorcing over fifty effects your estate planning. If you would like to learn more about estate planning and divorce, please visit our previous posts.

Reference: AARP (Jan. 25, 2022) “Getting Divorced? It’s Time to Update Your Caregiving Plan”

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Roth IRAs are Powerful Retirement Savings Tools

May 19, 2022

Roth IRAs are powerful retirement savings tools. Account owners are allowed to take tax-free distributions in retirement and can avoid paying taxes on investment growth. There’s little downside to a Roth IRA, according to a recent article “10 Reasons to Save for Retirement in a Roth IRA” from U.S. News & World Report.

Taxes are paid in advance on a Roth IRA. Therefore, if you are in a low tax bracket now and may be in a higher bracket later, or if tax rates increase, you’ve already paid those taxes. Another plus: all your Roth IRA funds are available to you in retirement, unlike a traditional IRA when you have to pay income tax on every withdrawal.

Roth IRA distributions taken after age 59 ½ from accounts at least five years old are tax free. Every withdrawal taken from a traditional IRA is treated like income and, like income, is subject to taxes.

When comparing the two, compare your current tax rate to what you expect your tax rate to be once you’ve retired. You can also save in both types of accounts in the same year, if you’re not sure about future tax rates.

Roth IRA accounts also let you keep investment gains, because you don’t pay income tax on investment gains or earned interest.

Roth IRAs have greater flexibility. Traditional IRA account owners are required to take Required Minimum Distributions (RMDs) from an IRA every year after age 72. If you forget to take a distribution, there’s a 50% tax penalty. You also have to pay taxes on the withdrawal. Roth IRAs have no withdrawal requirements during the lifetime of the original owner. Take what you need, when you need, if you need.

Roth IRAs are also more flexible before retirement. If you’re under age 59 ½ and take an early withdrawal, it’ll cost you a 10% early withdrawal penalty plus income tax. Roth early withdrawals also trigger a 10% penalty and income tax, but only on the portion of the withdrawal from investment earnings.

If your goal is to leave IRA money for heirs, Roth IRAs also have advantages. A traditional IRA account requires beneficiaries to pay taxes on any money left to them in a traditional 401(k) or IRA. However, those who inherit a Roth IRA can take tax-free withdrawals. Heirs have to take withdrawals. However, the distributions are less likely to create expensive tax situations.

Retirement savers can contribute up to $6,000 in a Roth IRA in 2022. Age 50 and up? You can make an additional $1,000 catch up contribution for a total Roth IRA contribution of $7,000.

If this sounds attractive but you’ve been using a traditional IRA, a Roth conversion is your next step. Roth IRAs are powerful retirement savings tools, however, you will have to pay the income taxes on the amount converted. Try to make the conversion in a year when you’re in a lower tax bracket. You could also convert a small amount every year to maintain control over taxes. If you would like to learn more about retirement planning, please visit our previous posts.

Reference: U.S. News & World Report (April 11, 2022) “10 Reasons to Save for Retirement in a Roth IRA”

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Blog Articles

Life Insurance can help Women with Estate Planning

Latest Ways to Prevent Dementia

Avoid Family Disagreements over Caregiving

Conducting an Estate Inventory is Vital

Benefits of Pre-Planning Your Funeral

Documents You need if You become Incapacitated

Leaving Property in Trust is Common

Have a Plan before You become Incapacitated

How Divorcing over Fifty effects Estate Planning

Roth IRAs are Powerful Retirement Savings Tools

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