If you have designated someone to receive the assets inside your retirement account after you pass away and you then take a loan, there are other things to consider before you pull out these funds. If you fail to return the money and pass away in the interim, the loved one you intended to receive those assets will be affected. Furthermore, there are other downsides to pulling money from your 401(k) plan.
Keep in mind that for any money you pull out, you’ll pay interest. You cannot deduct the interest paid, and those funds will not appreciate while on the loan. In addition, since you’ll have to repay that loan from your personal paycheck, your cash flow will be affected. Other restrictions and fees can apply based on your employer’s rules. For example, most of these plans only allow you take out one loan at a time. Repayment comes up pretty quickly for anyone who has withdrawn the funds, so it can be dicey as to whether or not you’ll be able to pull out enough money to cover your immediate needs.
Don’t forget about tax consequences if you’re unable to pay the loan back, either- this means it’s taxed like ordinary income and a penalty could apply of 10% if you’re younger than 59 1/2. Having a large tax bill could be an even bigger challenge if you were to lose your job and had no way to pay it back.
When you take out a loan, don’t forget that you probably allotted your estate at least partially on the current value of those accounts. Awarding your retirement accounts to one child, as an example, could lead to conflicts after you pass away if you pulled funds from that account if the account was worth much less. Make sure you consider all these factors when looking to withdraw funds from an existing retirement account.
When contemplating your estate plan in full, it’s a good idea to ensure that you have more than one person listed on your accounts asked for beneficiary info. Usually these accounts will be your life insurance, your brokerage accounts, and retirement accounts. Outside of your will, these accounts have their own forms regarding beneficiaries and take precedence over what’s listed in your will.
This means that when you outline who you want to receive these assets if you pass away, the company is responsible for upholding whatever was last accurately written on these forms. If you haven’t updated them since your divorce, a former spouse would be legally entitled to get those benefits. Furthermore, you should review these designations every single year just in case your life has changed and you need to update this information.
Having a primary and secondary beneficiary helps your family if you do pass away. This articulates what the company in charge of that asset will do with it. If your primary beneficiary has passed away themselves, this ensures that your secondary beneficiary will get access to that asset in full. You can often determine the percentage split for the primary and secondary regardless such that if the first person passes away the second will receive all of the assets.
No matter what you decide, it’s smart planning to review these details every year and to update your primary and secondary beneficiary as needed. You’ll allow for a smooth transition of assets without confusion or mistakes that entitle someone to receive these assets without your full blessing.
When it comes to looking towards future, there are many different components you need to consider. If you have a will, a simple trust, and a life insurance policy in which you’ve named beneficiaries, you may assume that you’ve taken care of all of your crucial end of life planning. 7
However, you’ve only managed your estate plan at this point. Protecting and creating a legacy can take some more effort and a sit-down meeting with a knowledgeable estate planning attorney. An estate plan looks at the distribution of your assets as well as the opportunities to minimize taxes but a legacy plan creates a more far-reaching and comprehensive strategy for your assets, your family and the way that you intend to be remembered.
This means it’s about more than just naming who will receive the assets you pass on but also about preserving and sharing your community involvement, your personal history, your beliefs and your morals. There are several things you should consider in the process of generating a legacy plan including:
- How much control, if any, do you want to have over the continuing distribution of your assets?
- How do you want your heirlooms to be displayed or passed down?
- What are some ways that you can contribute to causes you care about?
Consulting with an experienced estate planning lawyer is strongly recommended if you find yourself and are prepared for the process of legacy planning and your estate planning together.
Your legacy plan and your estate plan articulate who you are to your loved ones and even to charities you care about. Talk to an estate planning lawyer today to learn more about the best options for you.
Most people assume that estate planning is only for the extremely wealthy but that is not the case. Do you have elderly parents? Assets like a bank account? A home? Grandchildren or children? If you have any of these, it’s important to have a comprehensive estate planning and it goes beyond more than just planning for taxes.
An estate plan is crucial for protecting your family when you pass away. However, it can also help you articulate your wishes over the course of your life should you become incapacitated. Naming a power of attorney allows an agent to step in and make decisions on your behalf when you become unable to do so. One of the most important components of your estate plan is your last will and testament. A recent Gallup poll identified that only 44% of Americans had a will in 2016.
This crucial document tells everyone of your final wishes and yet over half of Americans certainly have not made one. This leaves much more up to chance and can lead to confusion and potential legal battles for your loved ones. In addition to having a last will and testament, you should also name beneficiaries on tax deferred accounts so that those pass directly to the individuals specified outside of your will. Retirement accounts and life insurance falls into this category. If you have further questions about the estate planning process and how to draft it in a manner that serves your individual needs, contact an experienced estate planning lawyer today.
The long-term care landscape for Medicaid is changing quickly and this may cause us to consider as a society how to reconsider the way that we get personal assistance as we age or become disabled. Nearly half of all states in the country are currently provided long-term care benefits through Medicaid as managed care, and in fact a further 13 states are requiring that older adults receive care in this same way. Four out of five states in the country are expanding their home care benefits through Medicaid and others are even beginning to provide housing services through the federal program as well.
Since 1965, when Medicaid was first enacted, nursing homes were considered to be the primary place where long-term care benefits were delivered. However, this has shifted gradually towards the home and community assistance for many reasons including the fact that federal waivers programs gave states the flexibility they needed to make it a reality. A Supreme Court decision at one point required it and consumers demanded it.
More recently, the federal government allowed states to provide this care at some assisted living facilities. The trend towards home based care mostly affects those individuals who are recipients of Medicaid. The accelerated shift to managed care will have bigger consequences for all adults. Being able to get the help necessary in your own home as you age raises important questions. It is critical to have the estate planning documents that you will need to transition to this phase successfully, including your will, any trusts and then any powers of attorney that allow another individual to step in and make decisions on your behalf.
Far too many studies show that Americans who are most in need of estate planning have done absolutely nothing to protect themselves. Some of the most common estate planning mistakes can have a significant impact not just on you but also on your beneficiaries when you pass away.
Here are the most common mistakes you can make:
- Failing to update you will. Many people believe that their will is a ‘set it and forget it’ document, but if you get divorced or have any other major life changes, your will needs to be updated.
- Not having a will. Up to 64% of people living in the United States do not have a will at all. Many believe that they just haven’t gotten around to it or that they didn’t need one, both of which can be catastrophic mistakes.
- Overlooking the benefits of a trust. Wills only account for how your property will be distributed when you pass away but trusts go on for a set period governing the distribution of those assets. They can also provide greater control and privacy.
- Not being realistic about your heirs. Make sure you consider whether or not your beneficiaries have the emotional and financial capacity to handle money appropriately.
- Choosing the wrong trustee or executor. Choosing the individuals who will help step in and make decisions for you or to assist your family when you pass away can be extremely important. Make sure that the individuals that you have chosen understand the responsibility and are willing to accept it. You may also need to appoint contingency people to serve in this role in the event that the person you originally selected passes away.
Planning ahead for your retirement is important in conjunction with your estate planning. A study by Fidelity Investments recently identified that up to one-third of people hope to make financial resolutions they can stick to.
There are six different tips that you can follow to ensure that your retirement goals stay on track. These include:
- Breaking your goal into smaller chunks.
- Learning where you currently stand by assessing how much money is already in your retirement account and how much more you will need to accomplish your estate planning goals. You can use Fidelity’s retirement score calculator to assess your retirement savings needs as they stand now.
- Write down your goal and post it somewhere that you can see it every day. Research shows that this increases your chances of success.
- Share your goal with a person you trust, like a relative, spouse, trusted advisor or close friend.
- Track your progress and make it into a game. Checking your savings on a regular basis can help motivate you to continue with the progress you’ve already made.
- Put your savings on auto pilot by signing up for an automatic withholding out of your paycheck, either through an arrangement with your financial institution or through your 401(k) plan at work.
Employing all of these tips together dramatically increases the chances that you’ll be successful when setting a new retirement goal. Staying on top of your retirement planning will allow you to envision the future more successfully and have less anxiety about the prospect of leaving the workforce.
As you or your elderly parents age, there will frequently come a time when a new level of care becomes important. This is the appropriate time to consider how Medicaid can help assist with your financial planning but it is also time to consider whether or not it makes sense to have in-home care or to consider a nursing home for your loved one. When such a change becomes necessary, you need to be able to evaluate all of your options quickly. Aging at home is one common alternative to nursing homes.
Geriatric facilities are moving away these days from providing long term care beds to increasing the number of rehabilitative beds they offer instead. Since Medicare pays $500-$600 per day for a rehabilitative bed, while Medicaid only pay $125 a day for a long-term care event, this means that there is decline in the availability of long-term care beds, making it harder to find a space in an affordable and high-quality facility around the country. In-home care may be one solution that your family is eligible to use.
Home care options are much less expensive than a permanent facility and allow an individual to age in place and get the help that he or she needs in the comfort of their own surroundings. Finding the right person to provide in-home care is critical. Increased access to necessary services, better feelings of independence and cost savings are just a couple of the reasons why you and your family members may consider in-home care versus a permanent nursing home placement. Make sure to do your research about the provider for in-home care to feel confident about your final decision. This can help put you at ease regarding a great deal of the fears associated with helping a loved one transition into a new phase in their life.
If you are not saving enough for your retirement, then you might want to consider adjusting your health and exercise habits to allow you to work longer. A new study from the Transamerica Center for Retirement Studies identified that 39% of people globally who retired earlier than they expected, 29% of them did so for health-related reasons. In the United States alone, 61% of retirees left their jobs sooner than planned and this was the highest rate around the world.
A person in poor health was more likely to plan to work to age 70 or beyond and never retire when compared with those in excellent health. Although there is no guarantee that you’ll be able to work for as long as you intend to make up for retirement savings shortfalls, keeping yourself healthy is one of the best bets for continued employment. This certainly gives you the most opportunities to determine how long you wish to stay in the workplace. Only 58% of the respondents in this survey reported eating healthily and just over half reported avoiding negative behaviors like smoking or drinking too much.
You can reap numerous benefits for maintaining good health in the decades that are leading up to retirement. Taking care of yourself reduces your healthcare expenses and allows you to invest this in retirement to make up for a savings shortfall, and your retirement healthcare costs will be decreased. Consulting with an experienced estate planning attorney is strongly recommended if you are approaching retirement.
Being an art collector can be a hobby that you work on over the course of your life. Many art collectors discover, however, that their children may not be interested in the valuable collection that has been amassed. This presents the unique quandary when it comes to estate planning for the art collector. As with any other major type of collection, advanced planning can be extremely beneficial because it gives you the most opportunities to determine the best way to pass on your assets. Gifting to charity or museums are common things that an art collector might consider, but having this documented years in advance will give you a clear perspective over how this impacts your state and benefits others.
Consulting with an estate planning lawyer is strongly recommended if you have a large art collection. Special considerations must be applied to any large collection of materials particularly art which may have amassed a great deal of value over a long period of time. Considering the current capital gains environment, talking to a lawyer who is experienced in helping you determine a plan for passing on these materials is strongly recommended. This gives you the greatest peace of mind and the clearest plan about which museums or other organizations can benefit significantly from your donation and how this impacts your own tax implications as well.
Any other special collections you need to include in your estate planning? Schedule a consultation with an experienced estate planning lawyer as soon as possible to discuss the benefits of thinking well in advance about your planning opportunities. Your art likely holds a special place in your heart and thinking carefully about the best way to manage it going forward gives you more opportunities to approach your planning with an open mind.
It’s the middle of the year which seems like a great time to mentally check out and go on vacation. However, it’s appropriate to conduct a mid-year estate planning checklist. Having a consultation with your New Jersey estate planning attorney is one way to ensure that all of your materials are still on track and cover your unique needs from an estate planning perspective. Review any trust agreements and your existing will.
Over the course of a year and even in the last six months, your professional and your personal life could have changed dramatically. The next step is to consider whether the fiduciaries you’ve named are still appropriate. Significant responsibilities are aligned with your trustees and executors so they should be people that you trust. Likewise, review your financial powers of attorney and determine whether the beneficiary designations listed on your retirement accounts and your life insurance policies are still appropriate.
Any existing insurance coverage should be evaluated. If major life changes have occurred such as the birth of a child or a divorce, it may be appropriate to update some or all of your estate planning materials. One big mistake that people make is failing to fund a trust. During your mid-year estate planning review, you may wish to discuss your opportunities to fund a trust with the help of an experienced estate planning lawyer.
Talking to an attorney early on will help you identify your short term as well as your long-term plans as it relates to your estate. Passing on as much wealth as possible to a future generation or to charities may be one of your goals for minimizing taxes and determining appropriate vehicles for passing on this material are common reasons why you may wish to consult with an experienced estate planning lawyer.
Most people who understand the basics of asset protection probably have a revocable trust that can be easily changed and will eliminate the need for probate or naming a guardian in the event that you become incapacitated or pass away. However, leaving this as your primary mode of asset protection is risky. This type of trust does not necessarily offer any additional protection against your creditors over the course of your life or after it. This critical lack of protection could make a big difference if you suddenly need money for long term care and you could be exposing your non-liquid assets to significant risk.
Given that the U.S. Department of Health and Human Services identified that the average cost of long-term care is $138,000 per individual and that 50% of people in the United States will need assistance to meet their long-term care goals after age 65, it’s important to take a long-range view of asset protection as well. Just one negative asset protection event could jeopardize the entire structure of decades of financial planning.
Thinking ahead often requires the insight of an experienced professional like a knowledgeable asset protection planning attorney. With so many things to think about, you don’t want to be caught unaware when it comes to your financial decisions. Just one lawsuit could jeopardize what you have worked so hard to build.
Proper asset protection planning and business planning is the next crucial step for helping families adjust for the rising costs of long-term care. Remember that it can take years for asset protection planning to be effective so it’s a process you need to engage with early and after consulting with a knowledgeable lawyer about.
Under the gift tax, certain amounts of money can be given as an individual or as a married couple without the consequences of direct taxes. Whether this was a formal part of your estate plan or not, it can be one way that you help to support children as well as move assets outside of your estate while you’re still alive.
If you have a plan to pass on assets to your loved one, you may be eligible to take advantage of the gift tax exclusion and pass on assets while you’re still alive to minimize the potential complications and tax ramifications. It turns out that one study recently conducted by Merrill Lynch indicates that up to 48% of Americans at least aged 50 will overextend themselves financially in order to assist adult children with living a more comfortable life. The average amount the retirees are giving to their adult children is $6,800 per year.
Of those individuals who were passing on money to their loved ones while they were still alive, nearly 80% of them felt that it was the right thing to do. Half of those retirees felt that giving money to family members was something they had an obligation to do. When compared with other family members, it was the adult children who came out receiving the most from a retired loved one when compared with parents, siblings and grandchildren. If you have intentions to pass on assets to a future generation or if you have questions about the best strategies for doing so, you need to consult with an experienced estate planning attorney as soon as possible.
Various strategies can help you accomplish all of your estate planning goals, even giving to adult children in a way that is responsible and minimizes tax consequences.
Getting married for a second or third time is increasingly common in the United States. However, the complicated estate planning and financial issues can be anything but simple if you don’t schedule a consultation with an estate planning lawyer well in advance. There are many different issues that can emerge when it comes to blended families and second marriages. First of all, you may already have an estate plan in place from your previous marriage. There’s also a good chance that your former spouse was listed as a beneficiary on your retirement accounts and your life insurance policies.
If you fail to update this information, by law those companies are required to give it to the person listed on the accounts.
It is imperative that your estate plan be in conjunction with the other materials you have designed to pass on assets to people in the future such as your retirement accounts and life insurance policies. Some of the critical issues that you need to discuss with a knowledgeable estate planning attorney when getting married for a second time include:
- Community property versus common law
- Ownership and expenses
- Timing of inheritance
- Remarriage protection
- Use of the home
Consulting with a lawyer will help illuminate you on the various issues that can affect you and how to plan appropriately so that everyone is clear on their rights and responsibilities.
A new study has analyzed data on aging in the U.S. and how people nearing retirement feel about it overall. Plenty of government data indicates that there are two key factors influencing the aging population in America: longevity and the rising cost of healthcare. For anyone nearing retirement age, it’s important to consider how the assets you have set aside can help you accomplish your retirement planning goals and assist you through a long and healthy life.
This most recent study, completed by Felician University, explored how college students feel about their own aging. This is a unique perspective that has not often been covered in previous research. Typically, projects focus on those nearing retirement age or those who have passed it. Understanding the perspectives of younger people, though, highlights the value of long-term views with it comes to issues like investing, asset protection, and estate planning.
Most of the students in the study felt that they believed they would need assistance with activities of daily living after age 85, but that they hoped to have enough money to continue living independently even past that point. Most study respondents indicated that they knew they would need help planning financially for their elderly years, but that they didn’t know at what age that would become appropriate.
The findings of this study highlight a key point: those with the most potential to begin working now towards their long-term goals have no idea where to start. This makes it all too easy to put off retirement planning or estate planning until your options are more limited down the line. Planning now instead puts you in the driver’s seat for your future goals.
Not having any direct heirs might seem like an easy out when it comes to estate planning, but skipping over this process could be a big mistake. Make sure you’ve taken the opportunity to sit down with an experienced estate planning lawyer to talk through all the options. You may be able to make use of assets inside your estate to benefit charities or others, but talking with a lawyer can help you understand your choices.
Most people assume that if they don’t have a substantial amount in savings then they don’t need to worry about estate planning. What about your 401(k)? Or your life insurance policy? These items may already be in place but could require that you name someone to get these benefits when you pass away. These items pass away outside of your typical estate plan, so you need to have an awareness about who you name as beneficiary and whether that will change over time.
The right estate planning attorney can tell you more about philanthropic options if you wish to get involved in giving some of your assets to charity. Setting up plans in advance allows you to leave as much as possible to your other loved ones if you wish or to a charity. Without planning, the courts will take matters into their discretion when deciding what happens to your belongings and assets after you pass away. Even if you think you don’t have any heirs, you probably still want to exercise some control over your estate plan. Don’t wait to find out how you can pass on assets and gifts to others while you’re still alive or after you pass away.