RJG Legal

Should I Get Attorney to Write My Will?

“Estate planning can be tricky, which is why many people turn to attorneys to get the job done right.”

Drafting a will is an essential part of estate planning. Even though it’s vitally important, a recent survey from AARP revealed that two out of five Americans over the age of 45 don’t have one.

The Reflector’s recent article, “Things people should know about creating wills,” says that writing your wishes down on paper helps avoid unnecessary work and stress when you die. Signing a will allows heirs to act with the decedent’s wishes in mind and also will make certain that assets and possessions go to the right people.

Estate planning can be complicated. That is the reason why many people turn to estate planning attorneys to make sure this important task is done correctly and legally. Here are some of the estate planning topics to discuss with your lawyer:

List of Your Assets. Create a list of your assets and determine the ones covered by the will and those that will have to be passed through joint tenancy on a deed or a living trust. For instance, life insurance policies or retirement plan proceeds will be distributed by the beneficiaries you named in each account. Remember that your will can list other assets, like memorabilia, antiques, cars and jewelry.

Naming a Guardian. Parents with minor children should definitely designate the person or persons whom they want to become guardians, if they were to die unexpectedly. They can also use their will to name a person who will be in charge of the finances for the children.

Remembering Your Pets. It’s common for pet owners to use their will to detail guardianship for their pets and to leave money or property to defray the cost of their care. However, remember that pets don’t have the legal capacity to own property, so don’t leave money directly to pets in a will. A pet trust is legal in most states and is the best way to leave money and name a caretaker for your pets.

Stating Your Funeral Instructions. Settling probate won’t occur until after the funeral. As a result, any funeral wishes in a will frequently aren’t read until after the fact.

Designate an Executor. This is a trusted individual who will execute the terms of the will. He or she should be willing to serve and be capable of executing the will.

Those who die without a valid will become intestate. This will result in their estate being settled, based on the laws of where that person lived. A court-appointed administrator will have the authority to transfer the assets and property. This administrator is bound by the state’s intestacy laws and may make decisions that go against the decedent’s wishes. To avoid this, work with an experienced estate planning attorney to draft a will and other estate planning documents.

Reference: The Reflector (July 15, 2019) “Things people should know about creating wills”

What is a 403(b) Plan, and Do I Need It?

“A 403(b) plan is a type of tax-sheltered retirement plan that has a lot in common with the more widely recognized 401(k) plan.”

A 403(b) plan is for employees who work in organizations that serve certain religious, charitable, scientific, public safety testing, literary or educational purposes. If you’re eligible to participate in a 403(b) plan, look into it because there are numerous benefits.

Investopedia’s article, “The Top 9 Benefits of a 403(b) Plan” examines the top nine benefits of a 403(b) plan.

1. Your contributions are tax deductible. Contributions are placed into the 403(b) plan without requiring you to pay any taxes on it. The tax deduction can be a benefit because it reduces the amount of income tax paid at the individual's marginal tax bracket.
2. Taxes are paid on distributions in retirement. If you make traditional pretax contributions, you’ll need to pay taxes on distributions in retirement. However, most people are in a lower tax bracket when they retire and need less income than at their peak earning years.
3. Some 403(b) plans have a Roth option. Beginning in 2006, employers have had the choice to allow Roth contributions to 403(b) plans. Roth contributions aren’t eligible for a tax deduction. When you make withdrawals from the Roth portion of your plan, those withdrawals aren’t taxable.
4. Your savings grow tax-free. A major advantage of a 403(b) plan is that you don’t have to pay taxes on dividends, interest, and capital gains on investments held in the 403(b) account.
5. You can take out a loan on a 403(b). While it depends on the specifics of your 403(b) plan, most allow you to take a loan. Note that the requirements for the loans are very strict, and if you miss even one payment, it can mean defaulting on the entire loan amount. This triggers IRS penalties for an early withdrawal.
6. Your employer may offer matching contributions. If your employer offers matching contributions, make certain to contribute to take advantage of this free money. Employers can only contribute to a 403(b) on a pretax basis, and they’ll match Roth contributions up to specified limits—but they must do so with pretax money. Therefore, 403(b) contributions matched by an employer are subject to taxation of the initial amount and any subsequent capital gains.
7. You may be able to invest in low-cost “institutional” funds. In some instances, 403(b) plans can get a better return on investments, than individuals can get on their own. That is because while financial institutions will often reject undertaking small portfolio responsibilities, taking on 403(b) fund management role means they have access to hundreds of millions of dollars of new assets. To entice big clients, institutions will occasionally waive the prohibitively high minimum investment requirements, so employees can invest in "institutional" funds, which have extremely low expenses. In effect, the fund company provides a big discount on the expense ratio (or the cost to invest in the fund) for companies that have large retirement plans, which could save up to of half a percent per year in costs. That’s more money in your pocket.
8. The contribution limits are higher than for IRAs. An employee can put up to $18,000 into a 403(b), and employees who are 50 or older may be eligible to make up to a $6,000 additional catch-up contribution. These contribution limits are enormous, when compared with the $5,500 limit and $1,000 catch up limits on IRAs.
9. Additional contributions may be permitted by the “15-Year Rule.” A unique benefit of 403(b) plans is that they permit more contributions for people who have 15 years of service with the same employer and haven’t contributed in excess of the cutoff point in previous years.

There are quite a few benefits of 403(b) plans. To best take advantage of these benefits, contribute early and often.

Reference: Investopedia (October 15, 2018) “The Top 9 Benefits of a 403(b) Plan”

How Do I Include Retirement Accounts in Estate Planning?

“While most estate planning focuses on physical property, like your home, and liquid assets, such as investment accounts, retirement plans can actually make up a large portion of one’s estate. Due to the specific tax rules governing these assets at death, you must plan carefully to ensure these funds are integrated properly into your estate distribution plans and tax savings strategies.”

You probably made beneficiary designations for your retirement accounts, when you opened them. Remember: who you designated can affect your overall estate planning objectives. Because of this, when including your retirement assets in your estate, ask yourself if anything has changed in your life since then that would affect their status as your beneficiaries, as well as how they’d receive the retirement assets.

Investopedia’s recent article, “Include Your Retirement Accounts in Your Estate,” gives us some things to consider in the New Year.

Beneficiary Designations. Review your beneficiary designations after major life changes. If you fail to make these designations, the funds will most likely go into your estate—a horrible outcome from a tax and planning perspective. If your estate is named a beneficiary, your heirs must wait until probate is finished to access your retirement accounts. It is usually better to name an individual or a trust as your beneficiary.

Protecting Retirement Funds With a Trust. Another option is to include a trust in your estate planning, instead of giving your retirement funds directly to named individuals. This allows you more control over the distribution, while protecting your heirs from additional paperwork and taxes. Trust distributions keep a beneficiary from accessing and spending their inheritance all at once. It’s also a good idea if your beneficiaries include minor children who shouldn’t have direct access to the money until they are adults. Be sure to consult with an estate planning attorney, because there are tax and other complexities associated with designating a trust as beneficiary.

Required Minimum Distributions (RMDs). Your retirement plans have rules about when you are required to start taking distributions. For 401(k) accounts, you are required to start taking RMDs at age 70½. However, if you die and leave retirement plans and accounts to your heirs, these rules apply to them instead. A spousal beneficiary can roll over your retirement funds tax-free into their retirement plan and make their own distribution choices. However, other beneficiaries don’t have the same option. Tax treatment and distribution options vary, depending on who is receiving your retirement assets.

Tax Considerations. The biggest worry you need to address when designating retirement accounts as part of your estate plan, is how they’ll be taxed. Consider how to withdraw from these accounts while you’re alive and how to minimize tax consequences after you’ve passed.

Work with an estate planning attorney who has a strong understanding of retirement accounts and the tax and legal requirements of estate planning. That way you can be certain your retirement assets are distributed to the proper beneficiaries with the least tax liability.

Reference: Investopedia (August 27, 2018) “Include Your Retirement Accounts in Your Estate”

What Should I Think About Before the Baby Comes?

“Welcoming a child is an incredibly exciting time in your life. As you prepare for your new addition, it can be challenging to know where to start financially.

Prince William Living’s recent article, “Baby on the Way? Here’s How You Can Prepare Financially,” says that as you plan to welcome your child, consider these seven tips that can help you decide how to provide your family with the lifestyle you desire.

Examine your career. A new baby may cause you to think differently about your career goals—you may seek a promotion, a job with a higher salary or better benefits, or more education. Perhaps you or your spouse want to decrease your hours or become a stay-at-home parent. If you are thinking about changing your job status, examine the effect it may have on your take-home pay, retirement nest egg and benefits.

Lifestyle changes. Look at how your baby will affect your day-to-day activities. If your perfect lifestyle involves a new car or home, talk to a financial professional about whether to make the move now or in the future.

Childcare expenses. Nearly one-third of parents spend 20% or more of their income on childcare. In some states, the cost for a year of care can be more than one year of college!

Tuition. Private elementary or secondary school often costs money, and the price of a college education continues to rise at a pace faster than inflation. The 2017 tax reform expanded the use of 529 plans, so you can now withdraw up to $10,000 federal income tax-free per beneficiary, per year to pay for kindergarten through 12th grade tuition at a public, private or religious school.

Review your financial position. Unanticipated events can impact your finances at any time. Resolve to build or maintain an emergency fund that could cover three to six months of expenses. You should also prioritize your retirement savings. After your baby arrives, update your estate plan and insurance coverage as needed.

Consider family values. Consider how you want to teach your child about financial responsibility. Being intentional early, can help create clear expectations and ensure that you and your spouse are on the same page.

The family bucket list. Look at what activities matter to you and add them into your financial plan. Taking an annual vacation or having a vacation home are common goals for many families.

Adding a new member to your family has a way of putting your priorities into perspective. Use these reminders to plan accordingly. Don’t forget that you’ll need an estate plan now that your family is growing. Your will should name a guardian in case something happens to you and your spouse. If there is no will, or no guardian named, the state will decide who will raise your child. Talk with an estate planning attorney to make sure that your planning for the future is complete.

Reference: Prince William Living (December 2018) “Baby on the Way? Here’s How You Can Prepare Financially”

Here’s More Insight into Why Estate Planning is Critical

“You're never too young or too old, too rich or too poor to start estate planning.”

Fox 5 NY says in the article “Why estate planning is important regardless of your age or wealth” that this is great time to begin talking to your loved ones about estate planning, especially older relatives and parents.

The key to a successful discussion depends upon the right approach.

Try to always make suggestions, rather than demands. One great way to start the conversation with family members, is to mention what you're doing. You might say something like, “I just took care of my own estate planning. Have you done anything? Maybe we should talk about it.” That might get the conversation rolling.

Many people believe that, as they get older, they need a will. However, that’s just one piece of the puzzle: core estate planning includes a will, power of attorney, health care proxy and asset protection.

For most of us, the asset we most want to protect is our home. One of the best ways to do that is through an irrevocable trust. This trust may have tax advantages, could protect your home during a healthcare crisis and protect your home from your children's creditors.

You also need to find people you trust to help with finances and health care. A power of attorney is a legal document in which you grant a person the authority to handle finances on your behalf.

Similarly, a healthcare proxy is an individual who makes healthcare decisions, if you get sick or are in an accident and can't make decisions for yourself.

You can use one person to do both or separate individuals for each role. You can opt for a family member or a trusted friend. However, either way it should probably be a younger person, who won't be dealing with the same aging issues as you.

You should also note that your will doesn't cover everything. Make certain that any beneficiaries designated in your retirement plans or life insurance and any additional names on joint bank accounts are current. The beneficiaries you appointed by a designation form will get the money in those accounts, no matter what it says in your will.

If all of this sounds a bit complex, don't worry because an experienced estate planning or elder law attorney can help you with all of the forms and all of your questions. Just understand these three things before you visit an elder law firm: your assets, whose names are on the accounts and your wishes.

Reference: Fox 5 NY (December 12, 2018) “Why estate planning is important regardless of your age or wealth”

What Do I Need to Do To Get Financially Fit in My 30s?

“Take up the challenge and get on track for financial independence.”

Whether you’re 30 or 39, retirement will come up fast. Many people are surprised when they see how much they need to put away to keep their current standard of living in retirement.

Once you decide when you want to retire, you need to calculate how much money you’ll need and how you’ll get there. Of course, you should take advantage of company matching and various tax deductions, when saving for retirement. Don’t wait until your 40s or 50s to try to catch up. That will be painful, or worse, impossible.

Forbes’s recent article, “3 Steps To Financial Fitness In Your Thirties,” advises that when you start to accumulate wealth, be sure someone is watching your investments and that those investments are suitable for your time frames and financial goals.

Work with a fiduciary advisor you think can help improve your situation. This should be someone you trust, and most important of all, who you feel has your best interests at heart.

If you are accumulating assets, make sure they’re protected. Be certain you and your family are covered by having the correct insurance policies. Of course, in a perfect world nothing would happen. For instance, most people on disability would much rather be healthy. They’d love to be able to joke and say that having that disability insurance was a “bad investment”. However, those who are disabled and aren’t covered with a disability insurance policy, most likely wish they’d made sure they had this income protection in place.

Another form of protection is an emergency fund. If you don’t have one, start by regularly putting some amount of money into a non-retirement account. Even if it’s a small amount, something is better than nothing. If you were to be laid off, chances are that your unemployment benefits would not be enough to pay the rent or make a mortgage payment.

If you’re single, you should protect yourself—even more so than someone who has a partner to rely on. Many life insurance policies have living benefits that can protect you, if an emergency happens. You may also be able to use cash value life insurance to partially fund your retirement.

Finally, it’s critical that you think about estate planning. You should have an estate plan, including a will, Powers of Attorney, health care power of attorney and, if you have minor children, a guardian should be named in your will.

Let’s say you’re living with someone. If something happens to either of you, the living partner will most likely will be treated as a roommate—and have no legal rights to your property. An estate plan can be prepared to provide your partner with legal protection.

Reference: Forbes (December 17, 2018) “3 Steps To Financial Fitness In Your Thirties”

Do Millennials Need an Estate Plan?

“Young adults need estate plans too. It’s an entreaty all too often met with a shrug of the shoulders and a wave of the hand. At that age, we think we’re immortal. However, the uncomfortable truth is that no one knows how much time is left.”

A year ago, 58 people were killed during the Route 91 Harvest Music Festival shooting in Las Vegas. Many of those who lost their lives that day, were in their 20s and 30s. As we reflect on the pain their families must have felt and still feel, how many of them had plans in place, asks Think Advisor in the article, “Yes Millennials DO Need Estate Planning.”

If the statistics are the same as the rest of the country, most of these victims didn’t have any plans in place. That’s a shame, because their wishes died with them. There were probably a lot of families that didn’t know if their loved one wanted to be buried or cremated or what they would have wanted for funeral arrangements. They didn’t know who should receive what assets. Perhaps these young people had close friends that should have been remembered to help them ease their grief.

All young adults must think about creating an estate plan. Here are a few simple steps that could save their families a lot of pain, if the worst happens:

• Work with an estate planning attorney to draw up a will to create a plan for your belongings—who will inherit what, both financial and personal. You should also remember your virtual assets, such as your iTunes and social media accounts.
• Create a list of your usernames and passwords to all your financial and personal accounts. Make certain that your family knows about it and has access, if it’s online.
• If you have a 401(k) and company-sponsored life insurance, be sure to name beneficiaries on these accounts to avoid probate.
• Ask your bank for a payable-on-death (POD) account. This lets you name a beneficiary, keeping the account out of probate.
• Designate a durable power of attorney and health care proxy, which let others make financial and medical decisions for you, if you become incapacitated. If you want to give your proxy specific instructions, create an advance directive, also known as a living will.

Estate planning isn’t only for the old and rich, and it’s just as much about your own peace of mind, as it is creating clarity for families in a time of chaos. While we can’t prevent accidents or even tragedies like that in Las Vegas, we can help create a plan, so our families can concentrate on what matters: honoring the lives of loved ones.

What is My Retirement Plan Missing?

“How can you possibly know how much money you will need for retirement, if you don't know what you will be doing?”

Forbes’ article, “The One Piece Missing From Most Retirement Plans” says there’s just one small piece that many people don't think about when crafting their retirement plan. Any guesses what that is? Well, the missing piece is: THEIR RETIREMENT PLAN!

All the calculations are critical, but they aren’t much good without actually thinking about what you plan to do during retirement. There are two reasons why thinking about the final years of your life are crucial. The first is that you can’t possibly know how much money you’ll need for retirement, if you don't know what you’ll be doing, right? There’s a big difference in the money needed to travel around the world versus sitting on the porch knitting sweaters for grandchildren and playing bingo at church.

Next, when you wake up on your first morning of official retirement, you’ll have no responsibilities or plans. How great! But, be honest: how much can you really tend to your garden or catch up on reading? Retirement can be up to 30 years or more. That's a lot of time left to live. Retirees frequently are bored, lonely, or depressed during retirement, because they don't have the routine, social interaction or purpose that they had at work.

Before you begin your retirement calculations, ask yourself these questions:

• Where will I live?
• Do I want to downsize?
• What are my dreams and goals in retirement?
• Do I want to have the flexibility to move near my children?
• Do I want to help my children with their finances?
• Have I adequately considered the rising cost of healthcare?
• Do I have family to help me?
• Will I need to consider living in a retirement home?
• Do I want to work a part-time job to keep busy?
• Do I want to leave my estate to my children or charity?

If you’ve thought about how much money you have and how much money you'll need in retirement, that’s terrific. However, as you’re planning for retirement, remember to think about exactly what you’ll do when you retire.

Reference: Forbes (November 21, 2018) “The One Piece Missing From Most Retirement Plans”

What are the Top Four Estate Planning Mistakes Made by Celebrities?

“Americans are drawn to celebrities. We read about their lives, gossip about their deeds and ogle their pictures. Perhaps it is admiration of glamour, fascination with royalty or learning their tricks of the trade. However, celebrities often make the same mistakes as us “commoners.” Let’s use their stories as lessons learned, in protecting our wealth and values.”

The Reno Gazette Journal gives us the top four estate planning mistakes by celebrities you need to avoid in the article, “Yes, even celebrities make estate planning mistakes.”

You don’t have a will. Your affairs should be properly handled, and your family should be protected, when you pass away. However, neither singers Aretha Franklin nor Amy Winehouse had a will. Franklin left behind four sons with some financial issues. Amy didn’t take the time to plan either. She didn’t say how she wanted her $6.7 million estate to be distributed. Without any written instructions, her estate went through probate and was distributed to her parents. The primary purposes of a will are to designate the guardians of minor children, an executor of your estate and which beneficiaries are to get what assets.

Not considering a trust. Who wants to be a celebrity when it comes to private matters? Remember that a will is a public document, and anyone can go to the courthouse and look it up. However, with a living trust, your wishes remain private. Learn from the saga of the late Whitney Houston, who died at age 48. First, her will named her daughter Bobbi Kristina Brown as sole beneficiary. However, her daughter then died three years later at age 22. Houston’s estate was then involved in a battle with the IRS over the valuation of recording royalties and was assessed a tax bill of $2.2 million. To top it all off, her ex-husband Bobby Brown, ironically may be the heir of the Houston estate.

A living trust can help your estate plan remain private and away from others. It names who is entitled to your assets and how they are to get them. A trust names trustees. It also may provide estate tax benefits. If you look at Whitney Houston’s situation, a living trust may have helped by providing guidance to daughter Bobbi, after her mother’s death.

Failing to update your estate plan. We all experience changes throughout our lives. This includes finances, health, family dynamics and relationships—any one of these can mean it’s time for an estate plan review with your attorney. Look at the late Michael Crichton, the author of Jurassic Park, who was diagnosed with throat cancer, when his sixth wife was pregnant. Crichton failed to update his estate plan to include his soon-to-arrive son. His wife sued to include the baby as an heir, and Crichton’s daughter from a prior marriage opposed. The judge ruled the baby could inherit. Crichton could have saved everyone a lot of stress, anguish and money, by simply updating his estate planning documents.

Failing to plan for disability before death. You should also think about planning for the possibility of being disabled and needing assistance in managing your affairs. Ask your estate planning attorney about powers of attorney and living wills to help protect you and your loved ones, in case of incapacity. For example, the final years of blues singer Etta James, known for “At Last” and “Tell Mama,” were full of court hearings. The legal battle was between her husband of 42 years and her son from a prior marriage. Etta signed power of attorney over to the son in 2008, but her husband claimed that she suffered from dementia and was incompetent. Her son wanted to restrict the amount of money Etta’s husband spent for her medical care. They settled, and the husband was named as conservator. However, he was limited to $350,000 for medical care for his wife. Etta James passed a short while later.

These celebrity misfortunes with their estate planning don’t need to be a roadmap for you and your family. Talk with your estate planning attorney now.

Reference: Reno Gazette Journal (November 14, 2018) “Yes, even celebrities make estate planning mistakes”

What Estate Planning Mistakes Should I Avoid After a Divorce?

“According to a report from UBS Global Wealth Management, 56% of married women leave control of major financial planning and investing decisions to their spouses.”

Divorce can be a very difficult time and a big change for most people. However, women, in particular, often realize that they’re impacted most by the financial aspects of divorce. As a result, it’s no shock that many women find themselves financially overwhelmed when divorcing.

Forbes’s recent article, “The Top Estate Planning Mistakes Divorcing Women Make,” notes that even though you may be dealing with a lot of emotion at the start of a divorce, it's important to focus on certain issues, like your inevitably changing financial situation. This is especially important, if you have children. You may be busy taking care of many aspects of your immediate financial needs, but this is also the time to consider your future as well. It's never too early to address this often-overlooked task and learn how to protect yourself (and your children), while avoiding these estate planning mistakes that divorcing women commonly commit.

Reviewing Your Will. When you divorce, your will should be reevaluated and updated. If your spouse was named as a beneficiary on any accounts, you may want to make changes to those.

Reviewing the Children's Guardianship. If you don’t name a guardian, there's no knowing who gets custody of your children if you were to die. If you and your spouse already created a guardianship plan before you divorced, and you now have custody, review this plan. That’s because the appointed guardian may be one of your former spouse's family members. This may be someone with whom you’re no longer comfortable.

Failing to Plan for All Assets. You may be entitled to some of your former spouse's deferred savings plans, like a 401(k), IRA or other eligible savings plan. After you've claimed your share, be sure to designate beneficiaries (such as your children) for these plans.

Failing To Incorporate Trusts Into Your Estate Plan. A trust can help to protect your assets (and have them distributed according to your wishes) in certain circumstances. Creating a trust can ensure that your money still goes to whom you want after you pass. Trusts can also be used to defer asset distributions, until your minor children are legal adults.

No Planning Whatsoever. The biggest estate planning mistake a person can make is not having a plan at all. When someone dies without a will or estate plan, their assets go through probate. Your children, grieving your loss, will have to spend a great deal of time and money on this process. State law will determine who inherits assets, when there is no will or estate plan in place. The final decision may also end up being against your wishes. Estate planning may be the last thing on your mind right after a divorce, but it's important to make it a priority.

Not Using an Estate Planning Attorney. Many women new to the estate-planning process make the mistake of going at it alone. It’s critical to get the help of an experienced estate planning attorney. Without the help of a professional, you may overlook important aspects of the estate-planning process.

Reference: Forbes (November 8, 2018) “The Top Estate Planning Mistakes Divorcing Women Make”