Carlsbad CA Estate Planning

Choosing an Active Adult Community

“…if you’re contemplating moving into an age-restricted community, finding one that’s right for you takes work. While active adult communities generally offer the opportunity for a lower-maintenance (and sometimes lower cost) lifestyle, they vary enormously.”

For couples considering a move to an age-restricted community, the number of choices is larger than ever before. Interest in age-restricted communities is strong. In fact, according to Next Avenue’s article “How to Choose a 55+ Active Adult Community,” builder interest in these communities hasn’t been this robust since 2008.

How can you determine which is the best for you?

There are small, city-based apartment complexes, single family houses on gated golf courses and mammoth communities with more than 9,000 residents. Many are owned by their occupants, but an increasing number are rentals. At least one of the owners or occupants must usually be at least 55.

You’ll need to know exactly what you can afford. In addition to rent or a mortgage payment, most communities have a homeowner’s association or community fee. They can be around a hundred dollars a month or more.

While some communities have restaurants on site, fees don’t cover meals or health care. The monthly fees go towards maintenance of facilities and general exterior care, like lawn care, snow removal and community facilities, like a club house or a pool.

Run the numbers to be sure the costs of a new home will work with your retirement budget.

How active is the community? Some communities have club houses, organized activitie, and busy social schedules. Some take big trips, like cruises, with residents. Others have few structured activities. Take a look at the schedule—if everything looks like fun, then you’re looking at the right place.

What about your changing needs? You may arrive in the community as a healthy young retiree, but over time your needs will change. Does the home feature “universal design” that will be manageable as you age? This includes no-step entries, single-floor living, wider hallways to accommodate wheelchairs and a walk-in shower.

Take a look outside of the community as well. Are there things that you want to do in the area, like bicycling, shopping, visiting a museum or seeing a live performance? If travelling is important, how far is the community from major highways or an airport? For many retirees, living near a college community is an added boost for the ability to audit classes and attend shows, lectures and festivals.

Another way to future-proof your retirement home is considering where your children and grandchildren are living. Today’s retirees aren’t necessarily looking for golf courses and tennis courts. They want to be near family, and that often means moving to where their children live. Some couples wait to make relocation decisions, until they know that their children are staying put.

Reference: Next Avenue (June 12, 2019) “How to Choose a 55+ Active Adult Community”

Be Aware of These Myths about Social Security

“Researchers tell us that most people would be better off waiting to claim Social Security benefits. Yet most people file early.”

Despite everything written about filing for benefits as late as possible, more than half of seniors apply for Social Security before they reach full retirement age. It is now 66 and will rise to 67 for people born in 1960 and later. More than a third of all Americans apply as soon as they possibly can—at age 62. Only one in twenty-five applicants puts off filing to age 70, when monthly benefits max out, says the Washington Post in the article advising readers “Don’t believe these Social Security myths.”

Some people have no choice and must take their benefits early, because they’ve lost their job and have no savings. Others have better options, but they aren’t aware of them. That’s because of the many myths about Social Security. A survey found that while 77% of Americans thought they were pretty smart about Social Security, 95% couldn’t answer eight basic questions about the program.

Let’s look at these myths.                                                                            

It doesn’t matter when I take Social Security. Benefits increase by about 7% every year from age 62  to your full retirement age, and then by 8% each year between full retirement age and 70. This is a planned adjustment to ensure that people who opt for a larger check for a shorter period don’t receive more than those who file earlier and receive smaller checks. It’s better to delay, both for the larger check and the benefits that the surviving spouse receives. People who live longer can run out of savings, so having a larger check in your 90s could make a huge difference.

If I don’t expect to live a long time, I should claim benefits early. Most of us underestimate our life span. A 65-year old man today can expect to live to 84, and a 65-year old woman can expect to live to 86.5. Life expectancies are even longer for those in their mid-50s. However, here’s the thing: even if one spouse doesn’t live as long, by taking Social Security earlier, their spouse will have a smaller benefit. Married couples lose one of their checks when the first spouse dies, causing a big drop in income. The survivor receives the larger of the two checks the couple was receiving. Therefore, the higher earner in a couple, whose check will be larger, should delay taking benefits, if at all possible, to benefit the surviving spouse.

I can claim benefits early and invest the money to come out ahead. No investment today offers a guaranteed return as high, as what can be obtained from delaying benefits. You’d have to take a lot of risk to get close to the 7% or 8% guaranteed by Social Security.

As soon as I stop working, I have to file for Social Security benefits. Not true. You don’t have to file for Social Security benefits until you want to. Even delaying four years, from 62 to 66, can translate into a sustainable 33% increase in your standard of living.

I better apply before Social Security runs out of money and closes down. This myth becomes more widespread every year. If Congress doesn’t act, which is unlikely, by 2035, the system will still be able to make payments, although they may be curtailed by 20%. Eighty percent of your Social Security check is not zero. It’s also more than likely that Congress will address Social Security fixes.

Reference: Washington Post (June 10, 2019) “Don’t believe these Social Security myths”

Estate Planning for Digital Assets

“When you think about your estate, you may think about your personal property, real estate, or investments. You also have other, less-tangible assets—and they also deserve your attention.”

Every password-protected account that you own is a digital asset. They should not disappear into a void when you pass. They need to be protected, just as much, and maybe even more, than tangible assets. They can be stolen by cyber-criminals, who can loot bank accounts, retirement funds and more. You can direct that they be transferred, preserved or destroyed, says the Valdosta Daily Times in the article “Preparing an estate strategy for digital assets.”

Digital assets include information on phones and computers, content uploaded to social media sites like Facebook, Instagram and others, creative/intellectual content in digital property and records from online communications, including emails and texts.

Do these accounts really have any value? Yes—according to security software provider McAfee, the average American’s digital assets are worth about $55,000.

Estate strategies for digital assets require an awareness of new and changing laws about digital assets. Almost every state has now passed some version of the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA), which has defined a path for the future of digital accounts, when the owner passes. RUFADAA has set a hierarchical structure for the transfer of digital assets.

First, if the service provider has a means of permitting the transfer of the asset to a designated party of the original asset owner’s choice, that takes priority. Gmail and Facebook have a means of creating a directive to state the owner’s wishes.

If no such directives are on the website, then the instructions denoted in traditional estate documents must be followed, assuming that those documents are prepared properly.

If none of that is in place, then the service provider’s Terms of Service Agreement (TOSA) takes priority.  If the providers TOSA says that the account is a nontransferable lifetime lease, its ownership may not be transferred to another person. However, as a result of RUFADAA, the owner has the right to appoint a fiduciary to access, manage or close out an online account. The power may be exercised, if you are dead or if you are incapacitated.

However—you must name this fiduciary and grant the legal power to an individual through your will, power of attorney or trust agreement. Otherwise, no such authority can be given.

What else should you do? Leave a digital road map for your executor: accounts, passwords and username. Note that if the platforms use facial recognition or other biometric markers, they may not be able to gain access to the accounts. Check with social media and merchant websites to see what policies are for transferring or maintaining digital assets, when the owner dies. You should also look at reward points and credits to see how they can be transferred, and find out how pending transactions, like automatic orders, can be handled.

Consider your executor. Are they comfortable with the digital world, or a technophobe? If they may not be able to manage the digital assets, consider naming another person to handle this task. Your estate planning attorney will be able to include them in your estate planning documents.

Reference: Valdosta Daily Times (May 26, 2019) “Preparing an estate strategy for digital assets”

Retirement Minimum Distribution (RMDs) Fundamentals

“Once your money is in a retirement account, it’s there until you’re ready to use it, right? Not exactly.”

Most people don’t know the rules about required minimum distributions. Also known as “RMDs,” these are the rules that require investors to make withdrawals from their retirement accounts the year that they turn 70½. However, says Forbes in the article “5 Things to Know About RMDs,” these withdrawals can have a major impact on cash flow, taxes and financial planning during retirement. They are legally required to be taken, even if you don’t need them.

If the RMD is not taken at the correct age, there will be a 50% tax on the amount that should have been withdrawn. Add to that the amount of regular income tax on the sum of money withdrawn, and you have an expensive mistake.

There are ways to soften the impact of RMDs. However, you have to know the rules before you can create your strategy. Having a game plan for RMDs will help save the money you saved for many years, and allow that retirement nest egg more time to grow.

Note that there may be some changes coming as a result of the SECURE Act and the RESA Act, if approved.

Distribution rules that you need to know. The year you mark your 70½ birthday, that is, six months after you turn 70, you have to start taking RMDs from retirement accounts, including 401(k)s. That rule does not apply to Roth IRAs, which generally do not have any RMDs, until the owner dies.

The exception is if you are still working at a company and participating in the company’s 401(k) plan. If that is the case, you may want to roll over all your previous eligible savings into that account, to delay taking an RMD. However, there are also exceptions to this rule. They depend on your ownership stake in the company, so speak with an estate planning attorney to be sure what the requirements are for your situation.

While you’re at it, make sure that the beneficiaries listed on your accounts are correctly documented. If it’s been more than a few years since you last reviewed your beneficiaries, there may be some time bombs hidden in your IRA accounts. Divorce, death and changes of circumstances may make it necessary for you to change your beneficiaries. Do it now, while it’s on your mind. Once you die, there’s no recourse for your heirs.

When do I take my first RMD? RMDs must be taken by December 31^st of each calendar year. However, the first RMD must be taken for the year in which you turn 70½. You can delay that payment until April of the following year. If you end up taking two big distributions, will it throw your tax planning off? Will you be bumped into a higher tax bracket? This is why you need to plan your RMD out carefully. It may be better for your overall situation to take the RMD, as soon as you are eligible.

Accuracy counts. You can’t rely on an online calculator, since the rules are not one size fits all. Let’s say your spouse is ten years younger than you and is your sole beneficiary. You’ll need to use the Joint Life and Last Survivor Table. There’s also the Uniform Lifetime Table, but that doesn’t apply here. Check with professionals to be sure you are taking the right amount.

Where does your RMD come from? Even if 70½ is a few years away, it’s good to have a plan for how RMDs will impact the distribution of your investment portfolio. You have options, so you want to make a good choice. For example, do you want distributions to be made in proportion to the percentage of each of your holdings in your portfolio? Let’s say 40% of your retirement investment is in short-term bonds, then you would take out 40% from your investment holdings. Or do you want to take a percentage from specific holdings?

What about charitable giving? Once you turn 70 ½, you can directly transfer funds from a traditional IRA to a charity, which can reduce your tax burden. However, this must be done properly, directly to the charity.

The rules of RMD are complicated, and mistakes can be expensive. Think about your strategy early on, to make sure it’s done right.

Reference: Forbes (May 14, 2019) “5 Things to Know About RMDs”

 

Why We All Need to Have an Estate Plan

“If your family, especially your children, are still heavily dependent on you, you can still provide for them through proper estate planning, even if you are no longer present.”

Putting off estate planning is never a good idea. Life happens, and before you know it, “someday” arrives. Having an estate plan is advisable for everyone, says the South Florida Reporter in the article “Why Estate Planning is so Important.” It doesn’t matter if you are rich or poor—you need an estate plan. People with families who depend upon them, as well as singles who don’t, need an estate plan.

What exactly does estate planning mean? Estate planning is planning for the disposition of your assets, when you have died. It’s also done to protect you and your family, in the event you become incapacitated and cannot convey your wishes to others. It protects your family from complications, unnecessary costs and delays about distributing your estate.

Having an estate plan means that you have taken the time to plan out what you want to happen to your property and how you want to take care of your family when you are gone. For those who have young children, your last will and testament is the document used to name the person who will raise your children. It also lets you appoint a separate person (although it can be the same person) who will look after your finances, with regard to your children.

Without a will, a court will decide what should happen to your children and your property. The court must follow the laws of your state, which may not be what you had in mind. Let’s say you have a brother who lives far away and from whom you are estranged. If you don’t have a will and he is your legal next-of-kin, in some states he will inherit everything you own. It’s far better to have a will.

Estate planning also includes tax planning. Having an estate plan that is created by an experienced estate planning attorney with knowledge of tax planning will allow you to minimize your tax liability and make sure more of your assets are passed to the next generation, than are passed to the government.

Having an estate plans gives you the opportunity to take a long look at your life and your legacy. How do you want to be remembered? Do you want to leave behind part of your estate to a charity, a school or a healthcare facility that has been important to you or another family member? Planning for charitable giving is also part of an estate plan. Some people give because they are seeking tax benefits, but many are generous because they are creating a legacy.

Your estate plan can include a letter to your heirs explaining why you have made the decisions you have about your possessions and assets. This kind of letter is not a legally enforceable document. However, if there is a dispute about your will, it can be used to support your intentions.

Note that even the best estate plan needs to be updated every few years. Tax laws have changed with the new federal tax laws that were adopted in 2017. If your estate plan has not been reviewed by your estate planning attorney since 2017, it’s time for a review.

Reference: South Florida Reporter (June 12, 2019) “Why Estate Planning is so Important.”

Hope for the Best but Prepare for the Worst: My Personal Fire Catastrophe Story

You never think it will happen to your family...until it does. I know because it happened to my family. The picture you see here is of my wife and I renewing our vows at our house memorial ceremony. On April 26, 2019, our world literally went up in flames when my family came home to find our beautiful family home burned to the ground. We lost almost all of our belongings, jewelry, watches, clothes, furniture, irreplaceable family photos, irreplaceable family heirlooms, and one car. I was inside the house when that fire started, and I thank God every day my family was not.

Although my family is safe, this experience has shown me how important it is to be expecting the best but prepared for the worst. Having an up to date estate plan in place can be one of the best ways to prepare and protect your family from life’s unexpected tragedies. I know that if something unforseen were to happen, my family would be taken care of because I have taken the time to protect them and our assets by having a rock solid estate plan in place.

Planning for incapacity is also a necessity. Having an ill or incapacitated loved one can be extremely stressful for family members. Having the appropriate documents such as a current Durable Financial Power of Attorney and Advance Health Care Directive will absolutely relieve a huge amount of that stress. Taking care of an incapacitated person’s bills without a Durable Financial Power of Attorney is a nightmare. Making health care decisions for an incapacitated loved one is tough. The process can be a lot easier if the loved ones’s wishes are clearly outlined in an Advance Health Care Directive. Having clarity on who they want in charge and what their end of life wishes are can stop so much fighting within the family before it even starts.

If you have made the decision to move forward on family and asset protection, call my office today for a complimentary consultation. I look froward to helping you keep your family safe and happy.

Phone: (760) 438-5599
Email: www.WhyProbate.com

The Gift a Graduate Really Needs: Legal Documents

“As we head into graduation season, many families will start making plans for their young adult children to leave home for college, travel or to begin a new job.

As children or grandchildren start new chapters in their lives, one thing to be aware of: once they turn 18, parents no longer have access to their medical, legal or financial information. Parents are not legally able to made medical or financial decisions on behalf of their adult children, even if they are ill or incapacitated, warns grbj.com in the article “Give your graduate the gift of legal documents.”

Here are recommended steps to take, so parents can still be involved in their children’s lives when they are needed:

Health care proxy/medical power of attorney. Even if you are the person paying for health insurance, you are not legally permitted to make decisions on their behalf. Have your child sign a proxy/POA form designating who has the primary authority to make health decisions, if he or she is unable to do so. This is especially important when parents are divorced: both parents need to have the proper forms. Your estate planning attorney will be able to prepare these for you.

Durable power of attorney. If your child has signed a durable POA, you will be able to handle their financial matters, especially if your child becomes incapacitated.

HIPAA authorization. Medical providers may not disclose a patient’s medical status, unless they have legal permission. Your child should sign a HIPAA authorization with each of their providers, giving the parent access to all their information. This is especially necessary for a child with health or mental issues.

FERPA waivers. This one takes many parents by surprise. Even if you are the one paying for tuition and all college expenses, the college will not provide academic records, including grades and tuition bills, due to the Family Education Rights and Privacy Act. Contact the college and find out exactly what forms they need to be sure you have access to all of your children’s information, including any health and mental health treatment.

Wills and trusts. If a child has assets and no descendants, they need a will or revocable trust to protect the parent’s taxable estate and allow someone to manage these assets, if they die prematurely.

Medical records. Make sure the child has access to their medical records, including medications, allergies, immunizations, etc.

Insurance. See if the family’s medical, homeowner’s and auto insurance coverage extend to a child living away at school and in another state. If the child is renting a house or apartment, make sure they have renter’s insurance.

Proof of identity. Make sure the child has access to their passport, birth certificate or Social Security card, so they can get an internship or a job.

Bank accounts and credit cards. If the family’s regular bank does not have a branch where the child is attending school, the parents should consider opening a basic checking account at a local branch. Both parents and child should be on the account.

Registration. It’s time to register to vote and sons will need to register with Selective Service.

Helping children transition into adult life is both exciting and worrisome. The more information you can provide them with, and the more they learn to do for themselves, the better they will be able to manage their lives independently.

Reference: grb.com (June 7, 2019) “Give your graduate the gift of legal documents.”