So you were thinking that you don't need an estate plan? Think again. An estate plan isn't just about dividing your assets, it's also about when, how, and who will get those assets and if you still have minor children, it’s about who cares for those children. The law thinks this planning is so important that if you don’t have an estate plan, they will create one!
An estate plan is a set of legal document that lets you detail your wishes for the distribution of your property, care for family and the payment of your final expenses. Only 46% of U.S. adults have executed an estate plan, and only 36% of those with children under the age of 18 have a will.
If you die without an estate plan (i.e., intestate), the law of the state where you reside determines how your property will be distributed. For example, in Indiana, here’s what happens:
If you’re married, your spouse gets half of your assets and your children/grandchildren get the other half.
If you’re married without children, your spouse gets three-quarters of your assets, and your parents will receive one-quarter.
If you’re single, 100% of your assets go to your children.
If you’re single without children, your parents get one-quarter of your property and your siblings, nieces, and nephews will receive the rest.
The court will also appoint some individual to take care of your children. That’s known as a guardian, and it’s usually a family member. While that may sound OK, a judge’s criteria may not be the same as yours. It’s better if you decide which family member or perhaps skip your family altogether and choose a friend to serve as guardian. Without a will, you give up your right to choose.
Talk to an experienced estate attorney who can prepare your will to be certain that your wishes are clearly articulated and minimize the potential for others to contest the terms.
An executor (also known as a personal representative) is the individual you name to carry out the wishes detailed in your will. He or she also is responsible for settling all your affairs. Consider carefully the person you select for this responsibility. You should also name a successor executor, in case your first choice is unable to act. An executor's job includes the following:
Determining your assets;
Contacting those you've named to receive property and distributing it to them;
Notifying the credit agencies of your death;
Canceling your credit cards;
Opening a bank account for your estate;
Ensuring debt payments, utilities, taxes and other outstanding expenses are paid, while your estate is open;
Closing social media accounts;
Filing the will in the right probate court; and
Filing a final tax return and possibly an estate tax return.
There may be some property that won't pass via the will. This will include retirement accounts, life insurance policies, annuities, and property that is owned with another person (joint with rights of survivorship). These assets transfer, according to beneficiary designations or to the joint owner.
Anthony Bourdain’s family always needed a disaster plan to minimize strain in the worst moments and smooth the financial transition afterward. Now, when his loved ones are already stunned and vulnerable, they must make the hard decisions about managing the press, the authorities, and the fans. We can only guess about his financial situation.
Although his life revolved around his personal participation in every venture, there’s no indication that the work can continue without him. Therefore, it doesn’t look like there was any succession planning here. It remains to be seen if there was a plan to keep his businesses afloat, without his personal participation.
Bourdain never really created much of an institution around himself: the copyright on his books was never assigned to any trust, holding company, or other entity. He received production credit on his shows, but the actual production company belonged to other people. In addition, there is no restaurant for his heirs to operate or sell off. His books are seeing a posthumous bestseller effect now. The odds are good that ratings of unaired episodes will be the best ever. Bourdain’s daughter will see her piece of that income.
If he left a will, the rights and royalties of those works may be placed into a trust for her now and to use when she’s an adult. Otherwise, the money flows into Unified Gifts To Minors Act (UGMA) accounts, while the assets themselves sit in Unified Transfers To Minors Act (UGTA) accounts until she turns 18.
Unlike Michael Jackson’s kids, she has an immediate parental guardian to look out for her. It looks like Bourdain’s ex-wife received the $3 million New York condo as part of their divorce. She might already have all of the Bourdain cash, as it is. Otherwise, any child support now disappears.
Bourdain may have left plans for someone to monetize his legacy. With the right management, the Bourdain name and likeness could continue generating income. There could be book drafts to publish, TV concepts to pitch and restaurant concepts looking for investors. There is potential, and a creative and savvy executor can turn Bourdain’s name into the empire he never chased in life.
As the internet has become a constant in our lives, our personal and financial data is stored online more than ever.
Can you see a world without the internet and smartphones? You probably shudder at the thought if you are a part of the nearly 25% of U.S. adults that claim they are ‘almost constantly’ online." Add to that the 77% of Americans that say they go online daily. All of this is the say that it is time to treat these digital assets in the same way you treat your other valuable assets.
While the internet makes our lives much easier and everything is available with a mouse click, there are also some real issues for those who need to retrieve our digital assets after we’re gone. Digital assets include things like your personal e-mail accounts, online bank and brokerage accounts, frequent flier miles and social media websites. These may not seem like they have much value, but the value is in the vital data they contain—or the sentimental value of photos that are no longer kept in hard copy.
You should make special arrangements for your digital assets in advance. This allows the executor of your will to have access to this information. Provide the passwords of your computer and backup hard drives to your executor, if you’re storing your documents this way. If you’re storing your documents in the cloud, be sure that your executor has access to these accounts.
Even if you provide your usernames and passwords to your executor or a family member, he or she may have issues with the vendor service agreement that denies him or her the ability to access, manage, distribute, copy, delete or even close accounts.
There’s a new statute, the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA) that addresses whether and how a family member, executor, attorney-in-fact or trustee can access digital assets. Many states have introduced or adopted RUFADAA. This law is different from state laws governing estate administration, powers of attorney, and trusts. It doesn’t presume that family members and fiduciaries can access digital assets because of their relationship with the account owner. The statute requires express authorization before anyone is allowed to access the content of a digital asset.
It is possible to invest in a password manager, which maintains a record of your online accounts and passwords in a digital vault. These accounts can be set up in advance to provide access to a representative at a specific event, like your death or incapacity.
Make a list of your digital assets and store it in a location where your personal representative can access it. Talk to your estate planning attorney about adding language to your will that grants your executor the authority to access your non-financial digital assets and accounts. You can also ask him or her about adding terms to your power-of-attorney documents that will grant your POA agent authority to act on your behalf with your digital accounts and assets. If you have assets in a trust, consider amending the trust agreement with language that will let the trustee access digital assets and accounts.
Take a look at the policies of your online service providers concerning the death or disability of account owners. Each one has its own procedures. To ensure that your agent will be able to access these accounts, review these procedures and make sure the instructions in your estate planning documents match the information provided to the online account provider’s access-authorization portal.
The estate of Michael Jackson sued ABC and parent company Disney on Wednesday, saying a recent documentary on the singer's last days improperly used the estate's intellectual property.
A copyright infringement lawsuit that was recently filed in Los Angeles federal court claims that "The Last Days of Michael Jackson," which aired May 24, illegally used significant excerpts of his songs. Some of the material was from the hits "Billie Jean" and "Bad" and music videos, including "Thriller" and "Black or White."
Variety reported that the two-hour show had roughly 5.6 million adult viewers.
"Like Disney, the lifeblood of the estate's business is its intellectual property," the lawsuit says. "Yet for some reason, Disney decided it could just use the estate's most valuable intellectual property for free."
Representatives of ABC said they had not yet looked at the lawsuit, but reiterated a statement from last week that the special was a piece of journalism and "did not infringe on his estate's rights."
The lawsuit dismisses the idea that the documentary had any news value. The action says the show was "a mediocre look back at Michael Jackson's life and entertainment career." The lawsuit says Disney attorneys ignored letters of warning from the estate, before the airing of the documentary.
Michael Jackson died at age 50 on June 25, 2009. The cause of his death was acute intoxication from propofol. In 2011, former California cardiologist Conrad Murray was found guilty of involuntary manslaughter for giving Jackson a fatal dose of the drug. Murray served two years behind bars. His conviction was upheld in 2014.
Jackson was called the "King of Pop" and one of the most popular entertainers in the world. He was the best-selling music artist during the year of his death. His contributions to music, dance, and fashion—as well as his highly publicized personal life—made him a global figure in popular culture for more than 40 years.
Are you considering working, while collecting Social Security as part of your retirement? Even if it is just occasionally working part-time, when it comes to working and earning Social Security, you need to understand the impact that will have on this entitlement.
If you work while collecting Social Security, you need to be aware that if you start earning too much money at work, your income might be decreased. You might also end up paying more taxes for your Social Security benefits.
When you’re retired, if you claim at your full retirement age (FRA), you are entitled to receive 100% of your benefits from Social Security (that age varies based on your year of birth). Those individuals turning 62 in 2018, will be able to fully retire at 66 and four months and begin collecting Social Security.
But claiming benefits early means you get less in Social Security income each month than if you had waited until your FRA. Therefore, if you can wait until full age, or even later, it may be wise. For every month you claim before the full retirement age, the monthly benefit you receive will go down by a fixed percentage. You could claim an income that is about a third less, than if you would have waited. Claiming early and earning too much, means the amount you receive later may be reduced even more. This year, people who earn more than $16,920 will have a dollar held back for every two earned above the limit.
In 2018, your earnings can go to $17,040, and you won’t have your benefits impacted. Hitting your FRA and claiming in 2018 means you can earn $45,630 without a reduction in benefits. The reduction won’t be spread out over the year. Monthly benefit payments will be stopped until the amount reduced is covered and then you’ll begin receiving your monthly checks again.
Because there’s no pro-rating, you won’t get income from Social Security until the amount is covered. The rest of the checks will then begin coming each month until the end of the year, with any extra money withheld paid back to you the following year. It is not forfeited but added into your benefit calculation to up your benefit when you hit FRA.
The income limit on working only applies, if you’re younger than full retirement age. Folks who’ve already reached FRA can earn as much as they want, and it won’t reduce the benefits they get. The limit only applies to work earnings, not the money you gain from investments, annuities, pensions, etc. For those who are self-employed, Social Security will base their income on their net earnings.
The IRS calculates how much of your benefits will be taxed, based primarily on your adjusted gross income. To see if you will be taxed on your benefit, add half of your expected income to your other income and tax-exempt interest. If that’s more than $25,000 for you alone or over $32,000 for a married couple, some of your benefits will be taxable. If it’s more than $34,000 for you or $44,000 for a married couple in 2018, you may fall into the 85% social security tax bracket.
People keep working in retirement to keep busy, earn more or supplement their benefits. However, if you claim benefits early or work after reaching full retirement age and receiving benefits, consider what you earn and how it may impact your benefits.
According to the U.S. Census Bureau, America's 65-and-over population is projected to nearly double to 88 million by 2050.
In many U.S. families, children and parents are going to be switching roles. As parents age, they’re becoming their own kids’ children in many ways, requiring time and care, as well as sometimes creating a financial burden.
One concern is that aging parents can lose their mental abilities. The Alzheimer’s Association says that every 65 seconds, someone in the U.S. develops the disease. It’s now the sixth-leading cause of death. This can create additional long-term care needs for parents and result in an emotional and financial burden on adult children.
Parents with physical limitations may have difficulties living independently. Therefore, you should understand your parents’ long-term plans and how they will impact you. Let’s examine some of the things you can do, as your parents go through the aging cycle.
Family Conversations. While talking to your parents about these topics now may be uncomfortable, it will save you a lot of stress, time and money in the future. Parents who want to preserve autonomy should express their wishes. Parents should discuss their healthcare wishes, the what ifs and finances now to discover what options they may have for care. It’s important that adult children understand details of their parents’ financial situations before they’re unable to communicate due to incapacity or death.
Get the Family Affairs in Order. Create a system to help with gathering information. This should include medical histories and estate plans. Start to organize information with your parents as early as possible. Adult children should be sure that their parents have a will, a trust (or both), a durable power of attorney for property and a durable power of attorney for healthcare.
Determine Parents’ Long-Term Financial Needs. It’s extremely expensive to provide care for aging parents. Seek professional guidance to determine how much of your parent’s savings is currently allocated to pay for healthcare in retirement, not covered by Medicare. Look at long-term care insurance.
Be Involved. As parents age, look for signs of anything that might be amiss. If you aren’t near your parents physically, or perhaps need additional assistance, you may want to get someone to help you with the care management of your parents. An aging-care support person can go with your parent(s) to doctors’ visits, act as liaisons with care facilities and provide you with regular reports.
Creating an ‘estate plan that works’ takes time and care; does your plan include everything that you will need to make it possible for your loved ones to effortlessly handle your estate when the time comes?
Many people think that having an estate plan just means drafting a will or a trust. That is not true. There’s much more to add to your estate planning to be sure that all of your assets are transferred efficiently to your heirs when you pass away.
Investopedia’s recent article, “6 Estate Planning Must-Haves,” provides a list of items that every estate plan should have. This includes a will (and perhaps a trust), a durable power of attorney, up-to-date beneficiary designations, a letter of intent, a healthcare power of attorney and guardianship designations.
Let's take a look at each item on the list to see if you’ve left any decisions to chance.
Wills and Trusts. This should be one of the main elements of every estate plan—even if you don't have substantial assets. Wills are documents that make certain property is distributed, according to your wishes (if drafted pursuant to state laws). Some trusts also help limit estate taxes or legal issues. But this isn’t enough. The wording of these documents is extremely critical: a will or trust should be written in a way that’s consistent with the way you've bequeathed the assets that pass outside of the will.
Durable Power Of Attorney. A durable POA authorizes an agent of your own choosing to act on your behalf when you’re unable to do so for yourself. Without a power of attorney, a judge may have to decide what happens to your assets, if you’re found to be mentally incompetent. That ruling may not be what you wanted. A POA can give your agent the power to transact real estate, enter into financial transactions and make other legal decisions in your stead (as if he or she were you). This POA is revocable by the principal at a time of his or her choosing, typically at a time when the principal is deemed to be physically able, mentally competent or upon death.
Beneficiary Designations. Some assets can pass directly to your heirs, without being dictated in the will (like a 401(k) plan). Therefore, it’s important to have an up-to-date beneficiary, as well as a contingent beneficiary, on these types of accounts. If you fail to designate a beneficiary, or if the beneficiary has passed away or is unable to serve, a judge may decide what to do with your funds. This again may not be what you wanted.
Letter of Intent. This is a document, left to your executor or a beneficiary, that defines what you want to be done with a particular asset, after your death or incapacitation. It can also provide funeral details or other special requests. It’s not a legal document, but it helps inform a probate judge of your intentions and may help in the distribution of your assets if the will is deemed invalid.
Healthcare Power of Attorney. This appoints another individual (usually a spouse or family member) to make important healthcare decisions on your behalf, in the event of incapacity. If you’re thinking about creating such a document, you should select someone you trust, who shares your views and who would likely recommend a course of action with which you’d agree. A backup agent should also be named if your initial pick is unavailable or unable to act at the time needed.
Guardianship Designations. If you have minor children or are considering having kids, choosing a guardian is very important and many times is overlooked. Be sure the individual or couple you choose shares your views, is financially sound and is willing to rear your children. You should also add a contingent guardian. Without these designations, a judge could rule that your kids should live with a family member you wouldn't have wanted, and in some cases, the court could require that your children become wards of the state.
As you can see, a will is a great start, but it's just the beginning.
Our investment strategy needs to change during retirement. Nor should our investment strategy ever be set to autopilot unless we are willing to see our financial legacy further diminished by unnecessary taxes!
As you purchase an annuity or contribute to your IRA accounts during your working years, rules and regulations mandate that you treat these accounts as ‘retirement savings’. Nothing wrong with that but the problem is that many continue to save these accounts after their retirement continuing to think of these accounts as the last resort when paying bills. The problem with that is that you may be saving these accounts for your children while simultaneously handing the IRS more money from these accounts than you intended; in retirement your income declines and therefore so too your income taxes especially if you are entitled to a medical deduction whereas your children are likely at their highest earning potential when they inherit these accounts.
Unlikely Virginia, there are states where there’s an inheritance tax. In that case, who pays the inheritance tax on top of the income taxes that will be due?. The inheritance tax will be based on the value of the annuity or some IRAs and the inheritor relationship to the deceased.
For example, in New Jersey, transfers for less than $500, life insurance proceeds, and certain state and federal pension payments are exempt. However, everything else is subject to the inheritance tax. This includes items controlled by beneficiary designations, instead of a will, like an IRA, 401(k) or annuity. If it’s an annuity at issue, the date of death valuation must be listed on the New Jersey Inheritance Tax form (IT-R), which is for assets left to Class D beneficiaries. The personal representative (or executor or administrator) of the estate has a fiduciary duty to file the inheritance tax return (Form IT-R). The tax return, along with payment for any taxes owed, is due eight months from the date of death in that state.
The person responsible for paying the tax depends on the deceased's will. For example, the will could state that all estate or inheritance taxes are paid out of the deceased's residuary estate, which is the part of a deceased's estate that remains after all debts have been paid and specific bequests have been distributed.
If the estate has sufficient funds to pay the tax, the beneficiaries won't owe anything. However, the will could state that all estate/inheritance taxes are paid proportionately by the recipient, even for assets not controlled by the will. That’s the default in New Jersey when the will doesn’t say how death taxes get apportioned or the deceased died intestate (without a will).
There can be an issue when the beneficiary refuses to pay his or her share. In that case, the executor is still obligated to pay the tax with other estate funds, if any, which will negatively affect the inheritance of other beneficiaries under the will.
In that case, the executor can sue to recover the funds from the non-paying beneficiary. If the executor can't pay the tax because there aren’t enough funds in the estate, the state of New Jersey will bring a delinquency claim directly against the non-paying beneficiary.
To avoid either one of these scenarios, you should pay your share of the tax (if any) as requested by the executor.
Discerning truth from fiction and marketing from reality, when it comes to assisted living facilities is no easy task.
Assisted living and board-and-care facilities are a popular and rapidly increasing segment of housing for seniors. However, what many people don’t know is that assisted living facilities are “non-medical” models of care—not requiring nurses or any medically trained personnel onsite daily. This misunderstanding can create real problems for those residents with multiple complex and chronic medical issues.
There are about 7,500 assisted living (AL) facilities in California. They range from small, six-bed residential homes to larger facilities with 100-plus beds. The larger facilities typically have the decor and ambiance of an upscale hotel, rather than an institutional medical facility. Regardless of size, they all have a few things in common:
They’re less expensive than skilled nursing facilities;
They’re predominantly private pay;
They’re regulated by the Dept. of Social Services and Community Care Licensing Division;
There’s no current rating system to help consumers make informed decisions when selecting an assisted living facility for their loved one; and
They don’t have the strict regulation and record keeping that the Departments of Public Health and Health Care Services require skilled nursing facilities.
According to the National Institutes of Health, assisted living facilities to provide care to a large number of older adults, including many with complex health problems. The most common reasons for entering AL are dementia and functional impairment, but most residents (94%) have at least one chronic medical condition, with 76% having two or more chronic conditions.
Families often don't have realistic expectations. The marketing person makes promises about what's available. However, families don't know to ask questions about the staffing levels, the supervision, and how medications are administered. Loved ones don't realize it’s not a nursing home, and that it doesn’t have skilled nursing care.
The reality of this lower level of care may result in loved ones receiving a midnight call, that Mom got confused, wandered away from the facility and is now lost. Or that Mom’s fallen and broken a hip.
In San Diego, seniors and family caregivers can access reliable information on how safe and well-operated assisted living facilities are from the San Diego County-funded Choose Well program. It’s the first rating system of assisted living and board-and-care facilities of its kind in the state. It’s a guide to selecting a residential care facility on a website, where the information can be easily accessed.