Wednesday, September 19, 2018

In Buying Long Term Care Insurance, It Pays to Go for the Sweet Spot

“For aging baby boomers, planning for long-term-care costs becomes more pressing every day. But the insurance that helps cover those costs is surging in price, while the benefits are becoming skimpier,” Eleanor Laise comments in Kiplinger’s Retirement Report.

It’s true. According to the American Association for Long-Term Care Insurance, the overall cost of new long-term care coverage has been jumping roughly 9% a year.

At Rebecca W. Geyer & Associates, our attorneys have been paying attention to the reduced number of viable long-term care insurance choices being offered to our Indiana estate planning clients. For one thing, as Kiplinger mentions, benefits such as lifetime coverage and a 5% compound inflation benefit protection have either become unaffordable features or aren’t being offered by some insurers.

There are most definitely “sweet spots” for purchasing long-term care insurance, we concluded.  Those “sweet spots” relate to wealth, health, and age:

Age related sweet spot:

Ideally, clients purchase long-term care insurance when they are in their 50s. Not only do premiums begin to rise quickly from there, but one-quarter of applicants age 60-69 are rejected, Laise points out.

Asset-related sweet spot:
Wealthy people (Kiplinger refers to those with financial assets of $2.5 million +) may decide to forgo insurance. If they end up not incurring long term care costs, their heirs will receive more; if they do need to pay for long-term care, they can afford to do so. People with limited assets and those who cannot reasonably sustain the premium costs over decades would be better off not buying expensive policies, perhaps choosing lower benefits or limited benefit period coverage.

Health-related sweet spot:
Insurers have been tightening their underwriting standards, Laise emphasizes, so buying while you’re in good health has become even more important. Some companies have added blood tests and scrutinize family history for heart disease and dementia.

At Geyer Law, there are two phenomena we’re paying attention to - permanent life insurance with a critical care rider and hybrid insurance. In next week’s blog post, we’ll discuss the plusses and minuses of each of these approaches to long-term care insurance.  Stay tuned….
- by Rebecca W. Geyer

Wednesday, September 12, 2018

Avoid Aretha's Estate Planning Mistake

Avoid the estate planning mistakes of Aretha Franklin and Prince, advises Richard Eisenberg, writing in Both these one-time blockbuster music stars died without a will or trust, Eisenberg notes, and, he warns, “Following in their footsteps could mean your loved ones won’t receive the inheritances you intended.” Problems you might cause your heirs include:
  • Disbursements could be long-delayed
  • Ugly family squabbles might ensue
  • Your estate might owe additional taxes
  • Your financial life will become a public record
  • If you have a special needs child, he or she may wind up losing government benefits
Considering the fact that Aretha Franklin knew she had pancreatic cancer, you would think she’d have considered creating a will.  At least one of her attorneys tried to get her to do exactly that, but the singer never followed through, Eisenberg relates.

What’s so all-important about having a will?
Having a will means that you, rather than your state’s laws, decide who gets your property when you die, explains. Wills can:
  • distribute your property
  • name an executor
  • name guardians for children
  • forgive debts
Without a will or other estate plan, state laws known as "intestate succession laws" decide which family members will inherit your estate and in what proportion. Most people want to distribute their property differently than the state would distribute it, continues. For example, many people want to leave gifts to friends, neighbors, girlfriends, boyfriends, schools, or charitable organizations – and intestate succession does not allow for any of that.

At Rebecca W. Geyer & Associates, our attorneys are focused on understanding your particular goals and concerns, taking a lifetime planning approach. That means planning for each client’s’ current needs as well as for a potential disability and death.

Control is really the name of the game and the real reason for having a will. Few people have an estate worth $80 million (the estimated value of Franklin’s estate), but deciding how one’s assets are distributed is still most people’s preference. Keep in mind that settling an estate involves a lot of emotions. The slightest differences can result in hurt feelings and recriminations. A will that clearly lays out your wishes may reduce conflict and speculation over what you “would have” wanted.
- By Rebecca W. Geyer

Wednesday, September 5, 2018

The Executor Shouldn't Need to Start from Scratch

When there’s a death in the family, the responsibility of settling the estate is often designated to the oldest child or to a sibling. One problem that too often arises, explains certified home inventory professional Cindy Hartman, is that, in addition to making funeral arrangements, placing the house on the market, and finalizing the financials, the executor needs to create an inventory.

The inventory consists of a list that must be submitted to the court within sixty days of the estate’s opening.  The list needs to include all financial assets as well as the contents of the home (and of any storage facilities) containing the deceased’s belongings. And not only does that inventory list need to be compiled, the executor must determine the fair market value of each item. In other words, besides gathering the estate property, paying debts and distributing assets to the decedent's heirs, the executor must also complete a court-approved inventory form.

That means that, at one of the most emotion-filled times in his or her life, the question on an executor’s mind is typically “Where do I start?” Hiring a certified home inventory professional can relieve the executor of this work, Hartman explains.

As estate planning attorneys, we at Geyer Law counsel:
  • executors
  • personal representatives
  • trustees and
  • beneficiaries,
with the goal of reducing stress and ensuring prompt resolution of the settlement and administration of estates.  We’ve found that regular communication with all parties involved goes a long way to reduce conflict and delays.

Still, it’s always better when you start things out as part of your estate planning process, rather than leaving the job to your heirs.  To start, Investopedia suggests, go through the inside and outside of your home and make a list of all items worth $100 or more. “Examples include the home itself, television sets, jewelry, collectibles, vehicles, guns, computers/laptops, lawnmower, power tools and so on,” the authors of “16 Things to Do Before You Die” advise.

Cindy Hartman has it right: Often individuals do not know where to begin when someone in their family dies. Planning before death can relieve a large portion of the burden work that falls upon the executor, although there are still tasks that will remain to be accomplished. We provide full-service estate administration services to guide families through the process from start to finish.

 - by Ronnie of the Rebecca W. Geyer blog team

Wednesday, August 29, 2018

Grantor or Non-Grantor Trusts - What's the Dif?

Some of the advice financial advisors give clients concerning setting up trusts may be outdated or overly simplistic, Martin Shenkman, a New Jersey CPA and attorney fears. In an article in Financial Planning, Shenkman offers a guide explaining the distinction between grantor and non-grantor trusts.

1. Grantor trust - the client sets up the trust and pays the tax on the income. Some plans, such as those involving life insurance, might be best held in this type trust. All revocable living trust are considered grantor trusts while the grantor is alive.

2.  Non-grantor trust – the trust, not the client, pays income tax on the income. This type of trust might be recommended for those who want to maximize charitable contributions deductions.

“Advisors need to understand the nature of the trust’s structure,” Shenkman explains, “as it affects not only income tax planning but also asset location decisions.” While advisors don’t need to be experts, he says, they need to have some understanding of the different nuances. When the client’s attorney recommends a type of trust, the planner must truly understand the nature of that trust, the author comments.

There are more variations of trusts than ever before, which means clients and their families can benefit from more strategies, Shenkman says, and planners should remain proactively involved in the planning.

“Recognize the value in a strong partnership between financial planner and estate planning attorney,” urges Mike Piershale in “It’s vital that clients have not only a strong estate plan, but have their finances secured as well.”

At Rebecca W. Geyer & Associates we fully agree. As a full-service estate planning and elder law firm serving the people of central Indiana, we work as a team with our clients’ tax, insurance, and financial planning advisors to best meet our clients’ estate planning and business goals.

Whether building a room addition or an estate plan, one important part of any strategy involves choosing the right tool. The choice of a grantor or non-grantor trust – and the choice to work as a team with our clients’ other advisors - can make a very big difference in terms of achieving the desired estate and tax planning outcomes!
- by Ronnie of the Rebecca W. Geyer blog team

Wednesday, August 22, 2018

Priority Added to the Indiana Health Care Act

Indiana has joined other states in specifying an order of priority for health care decision-making. House Bill 1119 establishes which parties can make health care decisions for an adult who:
  • is incapable of consenting to medical treatment (too physically or mentally impaired, or unconscious)
  • has not appointed a health care representative
How does the process work under the new law?
1.  The health care provider must make reasonable inquiry (by examining medical records and personal effects), attempting to locate and contact persons who can act on behalf of the patient.

 2. The law establishes a specific order of priority, (from most preferred to least preferred) of individuals who can make health care decisions for the patient in the absence of legal documentation appointing a representative:
  • judicially appointed guardian or representative
  • spouse (but not one who is legally separated from the patient or where a petition is pending for separation or annulment)
  • adult child
  • parent
  • adult sibling
  • grandparent
  • adult grandchild
  • nearest other adult relative
  • adult friend (one who has maintained regular contact and is familiar with the individual’s activities, health, and religious or moral beliefs
  • religious superior
House Enrolled Act 1119, remember, is designed to establish priority when the patient has not appointed a health care representative. At Geyer Law, a health care proxy document, which allows you to give another individual legal authority to make health care decisions for you, is an important part of the estate planning process. A second document, the living will, allows you to determine if you want your life artificially prolonged by tubes and machines if you’re suffering from an incurable illness or injury.

House Bill 1119 contains a second section referring to a document about end-of-life decisions called a POST or POLST (Physician Order for Life Sustaining Treatment).  While your living will is part of your legal documents, a POST is a medical order signed by a doctor, Advance Nurse Practitioner, or Physician Assistant, referring to immediate treatments. POSTS are usually recommended for terminally ill or very frail seniors, explains.

Although it’s a positive development that Indiana law now prioritizes who may make medical decisions on your behalf, advance directives ensure that your wishes are respected.

 - by
Rebecca W. Geyer

Wednesday, August 15, 2018

Beginning Next Year, Roth Conversions Can't Be Undone

With the halfway mark of 2018 behind us, it might be appropriate to direct some thought towards calendar-sensitive estate planning and tax planning topics. (Last week in our blog we covered donating Required Minimum Distributions from IRA accounts to charity, noting that the law has allowed more flexibility in the timing of Qualified Charitable Distributions.

Unfortunately, when it comes to Roth IRA conversions, flexibility appears to be going away. As Bill Bischoff puts it in, the new tax law “creates a perfect storm for Roth IRA conversions.”

By way of quick review, Roth IRAs have two big tax advantages as compared with “traditional IRAs:
  1. Withdrawals are federal income tax-free (assuming you’ve kept a Roth account open for at least five years, and you’ve reached age 59 ½ - or have become disabled).
  2. There are no annual required minimum distributions, even after age 70 ½.
Because of these two advantages, many individuals moved significant sums of money into Roth IRAs by “converting” their traditional IRA accounts to Roth status.  Yes, the conversion is treated as a taxable withdrawal, usually triggering a big federal and state tax bill, but…many believe today’s tax rates are the lowest we might see for the rest of our lives.

Since withdrawals from a Roth will be federal-income-tax free (so long as at least one Roth account has been open five years or longer), the motivation for doing the conversion now is to pay tax at today’s low rates (and enjoy spending it tax-free later – or leaving it as a legacy with less tax liability for the heirs).

Up until this year, a Roth conversion represented a reversible decision. Under prior law, if it turned out that the decision to convert traditional IRA monies into a Roth had a greater than anticipated negative tax impact, you could undo the deal up until October 15th of the following year. In fact, if you converted a traditional IRA into a Roth in 2017, you have the chance to reverse that conversion between now and October 15, 2018.

However, for 2018 and beyond, no longer will reversals of Roth conversions be allowed.

Handling IRA planning is yet another example of the way tax planning and estate planning tend to overlap. While Rebecca W. Geyer & Associates does not offer direct tax advice, we do coordinate efforts with other advisors to address the tax aspects of the planning process. This is an important change, and we want to be sure to keep our clients and blog readers apprised of all the latest updates in tax law.

 - by Rebecca W. Geyer

Thursday, August 9, 2018

Any Time is Now the Right Time for Donating IRA $ to Charity

After you attain the age of 70 1/2, you're required to take a minimum distribution from your retirement plans on an annual basis, regardless of whether or not you need the money. If you don't need your required minimum distribution (RMD) and have a charitable intent, it is possible to donate the RMD directly to charity and avoid paying income tax.

Details to note:
  1. Does the law include transfers from 401K’s or other pension accounts besides IRAs? The answer is no. A Qualified Charitable Distribution must come – and must come directly - from an IRA account.
  2. Is there a limit on the contribution? If you’re 70 ½ or older, you are allowed to transfer up to $100,000 to charity tax-free each year, even if that is much more than your RMD.  Your RMD for the year will have been satisfied, and the rest will not be included in your adjusted gross income.
  1. You cannot “double dip” by also deducting the money you’ve transferred to the charity as a charitable deduction.
  2. You cannot withdraw the money from the IRA and then write a check to the charity; the money needs to be transferred directly from the IRA to the charity.
Bonus benefits:
  1. Because making a tax-free transfer (rather than taking your RMD) keeps the money out of your adjusted gross income, you help avoid the Medicare high-income surcharge.
  2. Keeping money out of adjusted gross income can mean less of your Social Security benefits might be taxable.
The Qualified Charitable Distribution is just one example of the overlap between tax and estate planning.  And while the attorneys at Rebecca W. Geyer & Associates do not offer tax advice, we do coordinate efforts with other advisors to address the tax aspects of the planning process, and we make sure we keep our clients apprised of all the latest updates in tax law.

When it comes to IRAs, we don’t want you to miss out on any of the details, cautions, or benefits!

 - by Rebecca W. Geyer