Mike McCafferty's Estate Planning Blog

Retirement Planning and Your Estate

It can be tempting to think of different types of life planning in isolation. People do not necessarily start planning for how they want to live in retirement when they decide what courses to take in college and what type of career they would like to have.

Similarly, many people do not think about their estate planning when they are planning for their retirements. Estate planning is often left for much later.

However, this can be a mistake as Life Health Pro explains in "Bequest goals: more than just an issue for the wealthy."

The primary reason for this is that if you would like someone else to have a given asset after you pass away, then you need to make it so your retirement plan preserves that asset and that you do not have to use it. For example, if you would like to leave your home to your children, then your retirement plan needs to be sufficient enough for you not to have to sell the home to have funds to live on when you are no longer working.

This is true whether you have a large mansion or a more modest house.

What this means is that you should not think of life as entirely separate stages when you do your planning. Think about what type of estate you want to leave behind when you plan for your retirement and act accordingly.

Contact a qualified estate planning attorney to help you make appropriate plans.

For more information visit my Wichita KS Estate Planning Attorney website

Reference: Life Health Pro (Aug. 9, 2016) "Bequest goals: more than just an issue for the wealthy."

Demands On Your Money When You Retire

If you think of your money as a partner in your retirement plan, the idea that it should work hard for you makes a lot of sense. Consider these “demands” on money that appeared in “Seven demands retirees should place on their money,” from MoneyWatch:

• Growth: Make sure you still have a growth component in your portfolio so that you aren’t faced with attempting to live with an income that no longer covers your costs.
• Safety: Keep your money in a safe place and in the care of a reputable custodian who is not part of the investment company. Two words of warning: Bernie Madoff.
• Tax Efficiency: Remember what Mom used to always say, “It's not about how much money you make, but how much money you keep.” After tax cash flow is a must.
• A Healthy Long-Lasting Income: Ask your financial planner to conduct a cash-flow analysis to see how your money shakes out in five, ten, twenty and thirty years. Get help creating a plan that takes taxes and inflation into consideration and one that increases the probability that you’ll receive an income for the rest of your life.
• Control: Have some control over the access to your investments. What if there's an emergency?
• Access: Set some money aside for an emergency fund or rainy day fund, in case you have an unforeseen expense.
• Effective Estate Planning: Make sure that your estate plan lets your loved ones inherit your estate in the least-taxed, most cost-efficient way.

Make your money work hard! Speak with a qualified estate planning attorney.

For more information visit my Wichita KS Estate Planning Attorney website

Reference: MoneyWatch (August 3, 2015) “Seven demands retirees should place on their money”

Do’s and Don’ts For Aging Parents

A recent article in Hometown Life article, titled "Plan ahead to assure secure future for aging parents," stressed the importance of planning ahead for elderly parents are or may become physically or mentally unable to care for themselves. This process should include two important documents: a power of attorney—which can give an adult child legal authority to act on behalf of elderly parents with financial matters—and a medical power of attorney—to help them in medical matters. By starting early, children and their parents can work together to create these documents.  The article also answers questions on a few other topics:

What about putting your name on your parents' bank accounts?

Children should not be joint owners, because you’ll be subjecting your parents' assets to all of your liabilities, causing issues for future benefits. The government is more likely to scrutinize a joint account if the parent applies for Medicaid when transitioning to a skilled nursing facility. Instead, a signed financial power of attorney allows an adult child to pay bills, sign checks, and help the parent with other financial matters—without the need for joint bank accounts.

Who pays when an elderly parent, on Medicare, needs rehab in a skilled nursing center?

Medicare may pay 100 percent of the first 20 days. After that, Medicare may pay 80 percent, and supplemental insurance may pay the other 20 percent of the bill. There is a 100-day Medicare benefit, but not everyone qualifies. You also need to have a 30-day wellness period outside the hospital or a skilled nursing center for that benefit to reset. For example, if the parent leaves the facility on Day 20—but returns the next week—they start where they left off at Day 21 because they didn't have a 30-day wellness period.

Should I give any money away if considering entering a skilled nursing home (with Medicaid)?

No, Medicaid will examine the past five years of your finances when you apply for coverage. If you have given money away, you could be severely penalized with long periods of ineligibility and you may not get Medicaid even if you have zero dollars.

For more information visit my Wichita KS Estate Planning Attorney website

Reference: Hometown Life (January 23, 2015) "Plan ahead to assure secure future for aging parents"

Demands On Your Money When You Retire

If you think of your money as a partner in your retirement plan, the idea that it should work hard for you makes a lot of sense. Consider these “demands” on money that appeared in “Seven demands retirees should place on their money,” from MoneyWatch:

• Growth: Make sure you still have a growth component in your portfolio so that you aren’t faced with attempting to live with an income that no longer covers your costs.
• Safety: Keep your money in a safe place and in the care of a reputable custodian who is not part of the investment company. Two words of warning: Bernie Madoff.
• Tax Efficiency: Remember what Mom used to always say, “It's not about how much money you make, but how much money you keep.” After tax cash flow is a must.
• A Healthy Long-Lasting Income: Ask your financial planner to conduct a cash-flow analysis to see how your money shakes out in five, ten, twenty and thirty years. Get help creating a plan that takes taxes and inflation into consideration and one that increases the probability that you’ll receive an income for the rest of your life.
• Control: Have some control over the access to your investments. What if there's an emergency?
• Access: Set some money aside for an emergency fund or rainy day fund, in case you have an unforeseen expense.
• Effective Estate Planning: Make sure that your estate plan lets your loved ones inherit your estate in the least-taxed, most cost-efficient way.

Make your money work hard! Speak with a qualified estate planning attorney.

For more information visit my Wichita KS Estate Planning Attorney

Reference: MoneyWatch (August 3, 2015) “Seven demands retirees should place on their money”

The Last Halloween Story of the Season

Health care expenses are the main concern among Americans who are 65 and older, according to the last Halloween story of the season, "What Spooks Us Most About Money," from Forbes. In comparison, millennials have their own financial worries, chiefly the ability to pay their rent or make mortgage payments.

But here's the scariest part of the survey: about 21% of the 50+ respondents said their financial fears are holding them back from reaching their goals. That's gotta give you some estate planning chills! Many people 50+ are also undoubtedly scared of what will happen to their financial assets after they die and whether their loved ones will receive proper care.

The whole subject of estate planning gives some people the willies. It is scary to think about dying and planning for what may happen after your death. But not thinking about it could wind up haunting your family for years to come.

If you fail to name guardians for your children in your will, the court might name them for you. And if you don't have a written estate plan, your wealth could go to heirs you hardly know or do not want to have an inheritance.

Sit down with a qualified estate planning attorney and have him or her draw up a will or trust, if you haven't done so already. Ask if it would be wise for you to have one or more trusts, which can be extremely helpful if you have children or grandchildren with special needs.

For more information visit my Wichita KS Estate Planning Attorney website

Reference: Forbes (October 30, 2015) "What Spooks Us Most About Money"

HOW LONG WILL I LIVE AND DO I HAVE ENOUGH MONEY?

While few of us ever feel that we have enough money for retirement, strategies to help ensure that your nest egg lives longer than you do are addressed in The Boston Globe article, “Can you afford to live to 100?”

Delay claiming Social Security. This is the least costly way to add to your income later in life. For example, those born in 1949 are now reaching “full retirement age.” They are able to earn a benefit that’s 8% higher each year they delay, up to age 70. At the minimum, you should wait to claim until your full retirement age, which ranges from 66 (for people born from 1943 to 1954) to 67 (for people born in 1960 and later).

Buy an Annuity. Consumer Reports’ surveys of retired readers show that having a pension as a guaranteed income correlates with satisfaction in retirement. With these becoming less available, insurers are providing annuities, which have pension-like, lifetime income. If you have a small nest egg, the less you’ll want to devote to an annuity, as this effectively locks up your savings. A 65-year-old could cover all spending after age 85 by earmarking 10-15% of his or her current assets toward purchasing a longevity annuity.

What about Long-Term Care Insurance? The average cost of nursing home care in a semiprivate room is about $80,300 per year. Although 44% of men and 58% of women currently age 65 will need nursing home care at some point, those stays will average less than a year for men and less than 18 months for women. Most of the care is provided at home or another community setting. Half of nursing home and retirement care expenses are typically covered by either Medicare or Medicaid. Nonetheless, in assisted living facilities, where stays are around 22 months and the cost is about $43,200 annually, they might not accept Medicaid. You’ll need long-term-care insurance to fill the gap.

Don’t Forget Medicaid. If you believe you may require long-term care, either in your home or in a care facility, you should see where you stand as far as Medicaid. An experienced elder law attorney may be able to help you legally transfer certain assets before you submit your application.

For more information visit my Wichita KS Estate Planning Attorney website

Reference:  Boston Globe (September 11, 2015) “Can you afford to live to 100?”

They Ain’t Making Any More of it! Is Your Legacy Measured in Acres?

In the next decade, a quarter of our nation’s agricultural land is expected to change hands, according to the USDA Natural Resources Conservation Service. In “Planning for Farmland,” the Black Hills Pioneer discusses the need for that land to remain productive and valuable. Estate planning, done properly and with the special challenges of farmland in mind, can achieve this. The NRCS identifies four key goals for a strong estate plan for farm owners:

• Transfer ownership and management of the agricultural operation, land, and other assets to a new operator;
• Avoid unnecessary transfer taxes, such as income, gift, and estate taxes;
• Provide for financial security and peace of mind for all generations;
• Foster the next generation’s management capacity.

The American Farmland Trust (AFT), an organization operating under the NRCS, serves agricultural landowners, concerned citizens, planners, local officials, state agency staff, land trusts and policymakers. The AFT answers complex questions on all types of issues.

Talk with a qualified estate planning attorney and make sure your hard-earned investment and family legacy is properly protected.

For more information visit my Wichita KS Estates Planning Attorney website

Reference: Black Hills Pioneer (September 4, 2015) “Planning for Farmland”

Retirement Savings Options for the Self-Employed

Figuring out which retirement account is best for your circumstances will be easier after reviewing this article in Physician’s Money Digest, “Self-Employed Can Still Cut 2014 Taxes with a Retirement Plan.”It lists the pros and cons of each of these two accounts, along with a general description of each.

An SEP-IRAis similar to a traditional IRA in that the investment earnings grow taxed-deferred until they are withdrawn. However, a self-employed individual can save and deduct much more than the $5,500 ($6,500 if 50 and over) for contributions to a traditional IRA. SEP-IRA contribution limits are calculated as the lesser of 20% of net business income or $52,000 for 2014, $53,000 for 2015.

A Solo 401(k) is for self-employed individuals with no employees. Your spouse is not included in the employee count and is permitted to contribute to the plan if he or she is employed by the business. This 401k can be structured as a traditional 401(k) or as a Solo Roth. The maximum 2015 contribution is $53,000 or $59,000 for those 50 and older. The contribution includes (i) an annual employee deferral up to 100% of compensation or earned income for a self-employed individual (to a maximum of $18,000 and $24,000 if 50 or older), which allows some to contribute more to a Solo 401(k) than to a SEP-IRA; and (ii) an employer discretionary contribution of up to 25% of compensation as defined by the plan or 20% of earned income for a self-employed individual.

One advantage a 401(k) offers over an IRA is that you can borrow from a 401(k). If you opt for Solo Roth 401(k), there’s no deduction, but withdrawals are tax-free if you wait until you’re 59½. The plan lets you save much more than a Roth IRA. Another advantage for the Solo Roth 401(k) is that contributions aren’t subject to income limits (unlike the Roth IRA).

Which is better… a Roth or traditional IRA?It depends on many factors. If you expect to be in a higher tax bracket in the future, the Roth version may make more sense, but if your current tax rate is low, it might be better to forgo a deduction now in order to withdraw money tax-free when you’re in a higher bracket in the future. What’s nice is that it doesn’t have to be an “either-or” proposition: you can have both traditional and Roth 401(k) plans and divide contributions between them.

For most self-employed individuals, the SEP-IRA may be a better choice than a traditional IRA because the contribution limits are much higher. Also, deductions for traditional IRA contributions are limited by income for participants who are covered or whose spouse is covered by a retirement plan at work.

Talk to a qualified estate planning attorney to see how these IRA options may fit into your strategy.

For more information visit my Wichita KS Estate Planning Attorney website

Reference: Physician’s Money Digest (August 27, 2015) “Self-Employed Can Still Cut 2014 Taxes with a Retirement Plan”

A Con Artist and Untraceable Turkish Bonds

John T. Burns III lied and cheated a group of a dozen retirees, as reported in The Naperville Sun, “Naperville Man gets Prison for Role in $28 Million Investment Scam.” A mortgage salesman with no investment or estate planning credentials, he must have talked a good game to get them to part with their hard-earned retirement funds. But that was just the beginning.

A jury convicted Burns of wire fraud and mail fraud for his part of a larger Ponzi scheme, which bilked $28 million out of 120 people. Burns identified potential investors through seminars that promoted his presentation and offered a free meal to attendees. He then followed up with prospective clients and pitched what he claimed was a uniquely profitable investment opportunity in Turkish bonds. But Burns didn't tell them that the Turkish bonds didn't exist. Their investments were used to pay other investors in the scheme.

USA Retirement Management was ordered out of business in 2010 by the U.S. Securities and Exchange Commission. With no prior experience in estate planning or handling investments for clients, Burns held himself out as an experienced, certified estate planner to scam his clients.

If something sounds too good to be true—it probably is. Talk with a qualified estate planning attorney and resist the urge to get something for nothing.

For more information visit my Wichita KS Estate Planning Attorney website

Reference: Naperville Sun (August 13, 2015) “Naperville Man gets Prison for Role in $28 million Investment Scam”

Demands On Your Money When You Retire

If you think of your money as a partner in your retirement plan, the idea that it should work hard for you makes a lot of sense. Consider these “demands” on money that appeared in “Seven demands retirees should place on their money,”from MoneyWatch:

• Growth: Make sure you still have a growth component in your portfolio so that you aren’t faced with attempting to live with an income that no longer covers your costs.
• Safety: Keep your money in a safe place and in the care of a reputable custodian who is not part of the investment company. Two words of warning: Bernie Madoff.
• Tax Efficiency: Remember what Mom used to always say, “It's not about how much money you make, but how much money you keep.” After tax cash flow is a must.
• A Healthy Long-Lasting Income: Ask your financial planner to conduct a cash-flow analysis to see how your money shakes out in five, ten, twenty and thirty years. Get help creating a plan that takes taxes and inflation into consideration and one that increases the probability that you’ll receive an income for the rest of your life.
• Control: Have some control over the access to your investments. What if there's an emergency?
• Access: Set some money aside for an emergency fund or rainy day fund, in case you have an unforeseen expense.
• Effective Estate Planning: Make sure that your estate plan lets your loved ones inherit your estate in the least-taxed, most cost-efficient way.

Make your money work hard! Speak with a qualified estate planning attorney.

For more information visit my Wichita KS Estate Planning Attorney website

Reference: MoneyWatch (August 3, 2015) “Seven demands retirees should place on their money”