Stapleton Elder Law

Changes to New Jersey’s Taxes Now Effective: What You Need to Know

Residents of the Garden State will enjoy these changes to the tax codes for a state well-known as having some of the highest taxes and cost of living.

One of the biggest changes is the adjustment to the amount of retirement income excluded from the state’s income tax: doubling to $40,000 as of January 1, 2017, and even better, a plan to increase that  amount to $100,000 by 2020. According to Newsworks’ article, “New Jersey deploys tax changes for elderly and veterans in 2017,” it is hoped that this will make a big difference in the number of people leaving New Jersey during retirement.

Many of the retirees are living on Social Security, which the state of New Jersey doesn’t tax. They also have pensions or IRA distributions. This means that many New Jersey retirees will no longer pay state income tax.

The new legislation provides that the exemption from the state's estate tax will increase to $2 million and that it will be totally eliminated in 2018.

The state’s 7% sales tax rate has dropped to 6.875%.

It’s thought that most folks probably won't notice that adding the phase-out of the estate tax and the retirement income exclusion change are a big deal. However, it may mean that individuals won’t have an incentive to leave the state of New Jersey when they retire.

There are skeptics who point out that New Jersey still has some of the highest real estate taxes and income tax rates in the country. These high costs won’t be overcome by the new laws, but these changes are a step in the right direction. In addition, the new laws give military veterans a break on their state income tax and provides a tax credit for low income workers.

Reference: Newsworks (January 2, 2017) “New Jersey deploys tax changes for elderly and veterans in 2017”

To learn more about tax planning, please visit our website.

Special Needs Trusts in Massachusetts May No Longer Be Permitted if New Rules are Adopted

A strategy used by many to protect funds, usually so that services not covered by Medicaid can be paid for out-of-pocket, may become invalid if proposed eligibility changes become law.

Some families and seniors have set up trusts to pay for extra services that are not covered by Medicaid health insurance, but these may soon become problematic, as reported by The Boston Globe in “MassHealth may force seniors to make hard choice.” Massachusetts seniors and other Medicaid recipients may be forced to spend down assets, if they want to continue to qualify.

MassHealth, the state’s Medicaid health insurance program for nearly two million low-income and disabled residents, is contemplating changes to its eligibility requirements that would make it harder for residents over age 65 to establish special-needs trust (SNTs) accounts and still qualify for nursing home care and other health services from state and federal government programs.

Massachusetts officials say the proposed changes are designed to ensure that the state’s Medicaid rules adhere to the 2008 federal Medicaid guidelines, along with reducing the strain on the $15 billion MassHealth budget. These changes would require disabled seniors to spend down their personal financial resources, including money that’s held in a trust, before using MassHealth.

“As part of our regulations review, MassHealth proposed some clarifications to its eligibility regulations to ensure compliance with both federal and state law,” said Sharon Torgerson, a spokeswoman for MassHealth.

Advocates for disabled seniors say the changes will deny some residents small comforts that improve their quality of life. This change, they argue, could wind up costing the state more money by making those who are living independently move into more expensive nursing home care financed by taxpayers.

Individuals must get approval from their trust administrators to spend money, and they typically must submit bills for expenses like dental work not covered under Medicaid, health aides, clothing, and utilities.

The median annual cost for a shared room at a nursing home facility in Massachusetts in 2016 was about $135,000, according to an annual survey conducted by Genworth Financial, Inc.

Trusts have traditionally been a method for disabled seniors and their families to plan for long-term care—particularly if they have complex needs but don’t have children to help with expenses. To qualify for the state program in Massachusetts, an individual’s assets can’t exceed $2,000, and monthly income is limited to $100. Trust money had traditionally been exempt from those eligibility requirements.

However, in 2008, the federal Centers for Medicare & Medicaid Services clarified the rules, telling states that, in general, disabled individuals over 65 couldn’t transfer money into a pooled trust without a penalty. Essentially, that meant they couldn’t go on Medicaid until they had used up their assets.

The process started with a hearing in December on the proposed changes, and public comments are currently being considered. However, this is unlikely to be a straightforward matter. There are many factors considered when Medicaid eligibility is being determined, and trusts, including pooled trusts and asset transfers, are complex issues that do not automatically make someone ineligible. An elder law attorney will be able to help as these changes are being considered and when a final decision has been made by Massachusetts officials.

Reference: Boston Globe (January 3, 2017) “MassHealth may force seniors to make hard choice”

To learn more about special needs trusts, please visit our website. 

Paying for Elder Care Costs Nearly $7,000 for the Average American Family

How much Americans pay for elder care may be surprising, but there are sources that can help. Another surprise: millennials spend the largest percentage of their income on caregiving. Is it because their income is that much less, or are they more generous?

According to a recent CBS MoneyWatch article, “How to ease the pain of paying for elder care,” the cost of caregiving for parents, spouses or partners is shared by members of all generations, although the percentages vary. Baby Boomers spend 13% of their annual income on unpaid caregiving, and members of the Silent Generation, ages 71 to 91, spend about 25%, mostly on spouses or partners. The GenXers—ages 35 to 50—spend about 24% of their annual income on caregiving for parents, and millennials (ages 18 to 34) spend the largest percentage, at 27%. If you thought that millennials were still living off of their parents, it’s time to change that stereotype!

To address the impact that this cost has on the household, have a family meeting to assess your family’s financial and aging status and to plan for what may be required throughout the year. These types of discussions can help you plan for future elder care expenses in order to place them into a budget, along with your own retirement savings and savings for children’s education.

One source: ease the financial burden of caring for a loved one by investigating government programs. Many advocates are currently anticipating coming legislation that will aid family caregivers. State and local governments may also offer tax breaks and other aid programs for seniors, particularly those individuals needing home renovations to stay in their homes. Those tasked with caregiving should also look into neighborhood religious and community groups for support. There may be senior- and disabled-specific funding programs, along with able-bodied volunteers who can help lighten the load.

Depending on the family’s financial situation, including time constraints due to work schedules, it might make sense to look into professional help. An elder law attorney should be able to recommend an aging life-care professionals (formerly known as “geriatric care managers”) who will be able to help the family delve into elder care resources, including financial help. These professionals are usually social workers, gerontologists or other health care professionals with a focus on helping the elderly. They will be able to help you and your family plan for medical emergencies. Your elder care attorney will also work with your family to make sure that important documents, including power of attorney, health care proxies and other important documents are in place. Doing the planning in advance of an emergency is advised, since you will have more options and avenues of assistance.

Reference: CBS MoneyWatch (December 23, 2016) “How to ease the pain of paying for elder care”

To learn about planning in advance or planning for a loved one, please visit our website.

 

Not Just for the Wealthy: Estate Planning Fundamentals

Estate planning strengthens financial planning: one without the other creates the potential for problems.

An estate plan is necessary for any adult, whether they are wealthy or can fit all of their belongings in a suitcase. Are you surprised? An estate plan does far more than just tell the court how you wish to allocate your assets after you die. It is also a means of conveying your wishes about care, if you should become incapacitated and protects minor children by giving you the chance to name a guardian. An estate plan also tells the court how you would like to distribute your assets, and if it includes a living trust, can add a level of privacy to your estate plan. Without an estate plan, your financial plan is completely at risk.

The Chicago Daily Herald’s article, “Estate planning basics and avoiding probate with a living trust,” explains that the first step in the estate planning process is preparing a list of your assets. You should review the assets you have and how they’re titled. Once you have this set, think about what you want to happen to your assets after you die.

The Basics

A basic estate plan starts with a will. This document explains what you want done with your property after your death. A will is filed with the court upon your passing, and the executor of the will distributes your assets according to the will’s terms. Probate is a legal process whereby the courts determine how to distribute assets titled in your name among your heirs. Probate records are public records that anyone can access. The process takes approximately four to six months at a minimum, although it can often take longer. Probate is frequently required if the total value of the probate assets exceeds a set amount, or if there is any real estate.

Assets that are held individually with no named beneficiary will go through probate. However, not all assets must go through probate. Qualified assets, such as life insurance, annuities, IRAs, and 401(k)s with named beneficiaries will go directly to those named beneficiary(s) and will avoid probate. Those assets that have a payable on death or transfer on death designation will also pass directly to the named beneficiary(s) and avoid probate. This could be a checking or savings account. Finally, assets that are held jointly with rights of survivorship will go to the survivor. This is commonly the family home.

A Living Trust

A living trust is a document that states where you want your assets to go after you pass, but unlike a will, it keeps your assets out of the probate process so that your private business remains private. In addition to privacy, a living will lets you assign a family member, friend or corporate trustee to distribute your assets. An estate planning attorney will be able to help you properly set up a living trust that is best suited to your situation.

Reference: (Chicago) Daily Herald (December 22, 2016) “Estate planning basics and avoiding probate with a living trust”

To learn more about creating a sound estate plan that includes financial planning, please visit our website.

Just Bought a Crib and Car Seat? Time for an Estate Plan

New parents are all about making sure that their bundle of joy has all the right equipment, and that includes an estate plan with a guardian.

Most people would rather clean out the gutters than plan for their family’s life after they die, especially if they’ve just added a new member to the family. But when a new baby has arrived, is exactly the time when you need to make sure that a comprehensive estate plan is in place.

SF Gate’s recent article, “Congrats on Your New Baby! Now It’s Time for an Estate Plan,” says that an estate plan is correctly thought of as a series of legal documents created with a qualified estate planning attorney that sets out your wishes for the disposition of your assets and the responsibility for your dependents if they are minors when you die. Let’s look at some of the reasons why you should have a professionally-drafted estate plan.

For your children. Many experts say that this is the most important consideration. You’ll designate the person or persons you want to care for your minor children in the event you and your spouse die unexpectedly. You can designate a single individual or family to manage your children’s financial affairs. This is also known as a Guardian of the Estate. You can add another to care for your children (Guardian of the Person). The other option is to have one person or family member fill both roles.

For loved ones. Your estate plan will direct your loved ones how to make health care decisions on your behalf in the event that you become incapacitated. This is a big responsibility for the person who is chosen, so be sure to clearly state your intentions in a Healthcare Directive.

For your things. We all have prized possessions that have little actual market value but would have large emotional implications were you to pass away. A proper estate plan created by an experienced estate planning lawyer will speed up, or may even eliminate, the probate process. This will save your heirs and loved ones time, money, and added stress and grief. If you have specific instructions for the disposition of your prized possessions and assets, detail the reasons in your estate plan to avoid misunderstandings or hard feelings among your heirs.

Yes, it may feel sad to think about death when you are holding a newborn or celebrating another happy life event. However, these are necessary tools to protect those you love. Imagine how comforted your loved ones will be, knowing that you were thinking about them and caring for them. An experienced estate planning attorney will create the legal documents that you need, guide you through the decision-making process and make sure that your wishes are clear and your family is taken care of.

Reference: SF Gate (December 22, 2016) “Congrats on Your New Baby! Now It’s Time for an Estate Plan”

To learn more about the importance of creating an estate plan, please visit our website.

Why You Should Not Avoid This Difficult Conversation

It’s easy to talk with loved ones about happy events, but conversations about your end of life wishes are more important than you might think. Consider the arguments and hurt feelings that could be avoided, if your loved ones know exactly what you want, and why.

While most of our lives pass with only minor incidents, as we age the likelihood of being struck by a serious illness or having an accident increases. This means that our loved ones may face the difficult decisions that come with a parent’s passing. Making sure that your family members know what your end-of-life preferences are and discussing your wishes, along with putting an estate plan into place, can ease everyone’s mind and make a difficult situation a little less stressful.

The website seniorhomes.com recently posted an article, “10 Steps to Communicate Your End-of-Life Wishes.” According to the article, the most important question when it comes to communicating end-of-life wishes might be, “how to do it?” Luckily there are actions you can take to make the process easier for you and your family. Get going now, before it’s too late … and make it a priority.

Planning. There’s no better time than the present to let your family know about your final wishes. Start by drawing up a living will that states your treatment and care preferences in the event you are unable to speak for yourself.  You should also sign a durable power of attorney that appoints one or more family members or trusted friends to make medical decisions for you if you become incapacitated. Get that paperwork started today.

Clarity. It’s not pleasant to dwell on becoming too ill to make healthcare and other important decisions, but a critical injury or debilitating illness can occur at any time. As a result, it’s vital to be clear about your wishes as soon as possible—just in case.

Opportunity. Finding the appropriate time to discuss end-of-life issues can be tough, but there are certain events may give you the opportunity to do so. Possible occasions include those related to milestones like the birth of a child, marriage, death or serious illness of a loved one, retirement, an anniversary, during holiday gatherings, or when you create your will or other estate planning. Hopefully, you will have this conversation before an injury or a major illness that requires you or another family member to move out of the home and into a long-term care setting.

Discussions. Have these end-of-life conversations early to make certain that everyone understands your wishes. Your preferences may also change over time and necessitate future discussions on the subject.

Permission. Ask your loved ones for permission before launching into the topic. This will reassure them that you respect and honor their wishes.

Purpose. Your conversations with family need to include two important goals: (i) to be sure your financial and healthcare wishes are expressed and honored; and (ii) to give them the information and confidence they need to make future decisions.

Setting. Have the talk in a quiet and comfortable setting, such as a private spot without distractions. Be mindful of your state of mind and that of other family members.

Listening. Whatever your role in discussing end-of-life wishes, it’s important to listen carefully. Be certain that you hear and understand what your loved ones are saying.

Who participates in this conversation? Be aware that a loved one may want to talk about end-of-life wishes in private.

Pace. If you’re listening to a loved one express their wishes, led them set the pace and don’t argue about their wishes. They may not be your wishes, and they may not make sense to you, but these are their choices.

A respectful and thoughtful mindset will be needed, both by the person who is conveying their end-of-life wishes and family members. If for some reason, the conversation is not going well, you may find that an estate planning attorney can provide further pointers on how to help move the discussion along.

Reference: seniorhomes.com (December 22, 2016) “10 Steps to Communicate Your End-of-Life Wishes”

Please visit our website to learn more about discussing your end-of-life wishes.

 

Can a Non-Family Member be Your Executor?

Deciding who to name as the executor of your estate is a challenge for everyone. There are situations where you may need to consider someone who is not related by blood or marriage.

There are three key factors to look for when considering who should be the executor of your estate: one, the ability and personality to do the necessary tasks, even if they are unpopular; two, a willingness to be your executor and three, someone who knows you and your situation very well. If no family member meets these criteria, according to The Brainerd Dispatch’s article, “How to find an estate plan executor outside of your immediate family,” you may need to look to your extended family or outside of the family. You do have options.

Many experienced estate planning lawyers say that it's typically best to find an individual to serve as the executor of your estate. If you can’t think of any readily obvious choices that you believe would be a good fit, expand your thinking. Perhaps there is an adult grandchild who might be a possibility.  You might also have a good relationship with the adult child of a close friend who’d be able to carry out the tasks of executor.

Folks are typically very willing to help if asked. However, make sure that it’s not just anyone, but someone with some financial or legal knowledge and who is familiar with your wishes, even if they're not a member of your immediate family. They should also not be afraid to seek help from an experienced estate planning attorney.

There are some alternatives to working with an individual. If finding an individual you trust and is willing and able to serve as an executor for your estate is impossible, then you may consider engaging a third party to serve as your executor.

A financial advisor probably won’t be able to serve as the executor of your estate, due to his or her potential conflict of interest. However, you may be able to hire an experienced estate planning attorney. At the very least, he or she may have some relevant recommendations.

Once you have selected an executor, the next step is to devote the necessary time to review the details of your estate plan and your financial situation. Make sure that the executor understands your wishes and knows where important documents can be found. Whether the executor is your spouse or your best friend, they will appreciate being prepared when the time comes to settle your estate.

Reference: Brainerd (MN) Dispatch (December 23, 2016) “How to find an estate plan executor outside of your immediate family”

Please visit our website to learn more about selecting an executor.

 

 

Your Financial Checklist for 2016 Financials

Before the New Year gets old, follow these five steps to get your financial and legal house in order.

It is not flattering but true: people will spend more time planning their vacations than they do their personal finance or retirement planning, according to Business Insider’s article, “A financial adviser shares a 5-step checklist to complete before the end of 2016.” That’s why many professionals advise taking the time to conduct a review of your financial and legal health. This should include assets, liabilities and estate planning documents. You may have had a lot of changes in the prior year, you may have big plans for 2017, or you may have nothing on the horizon, but the habit of an annual review can provide great insight, help your planning and protect your lifestyle.

Here are some important financial steps to take at the start of 2017.

Take financial inventory. Consider aggregating your accounts and identifying what you have, such as IRAs, bank accounts, and life insurance. You should take an inventory of your debt and determine how you will pay it off in 2017.

Review your estate plan. OK, it’s not that exciting, but it’s important. Don’t wait until this time next year because tragedy can strike at any time. If you fail to plan properly, and something unfortunate happens, your family may be left unprepared. It's critical to have control over what will happen to everything that you leave behind.

Update your beneficiary forms. This is a task that should be reviewed periodically—especially if you've been married or divorced, had children, or retired in recent years. A designated beneficiary on an insurance policy or an IRA has precedence over a will or a trust. As a result, it's important to make adjustments after major life changes.

Make some smart tax moves. You should know how the taxes work on your 401(k)s and IRAs, so take a look to be certain you're saving effectively. The maximum annual contribution to a 401(k) is $18,000 or $24,000 if you're over 50. Therefore, if you've got a holiday bonus, that’s the perfect reason to add to your retirement accounts.

You should also remember that you can gift as much as $14,000 per person annually to as many people as you'd like without a gift tax liability. In addition, with any tax planning for retirement, you might think about converting your retirement money through a Roth IRA conversion ladder. Money transferred from a traditional IRA to a Roth is tax- and penalty-free after paying taxes on the conversion.

Evaluate your path to retirement. Retirement planning is important at every stage of life, so be proactive. If you create a plan, it can hold you accountable. It is important to speak with a qualified estate planning attorney. Don’t just “set it and forget it.” Stay on top of issues and continually monitor the situation.

If you are close to retirement, start having conversations with your estate planning attorney, CPA and financial advisor now about tax planning and expected sources of income. This includes guaranteed income, social security, a pension if have one, and how they will work together into your retirement income plan. Your discussions should include your tax situation, and what, if any, aspects of your estate plan need to change for future tax planning.

Reference: Business Insider (December 9, 2016) “A financial adviser shares a 5-step checklist to complete before the end of 2016”

To learn how your tax situation can impact your estate plan and vice versa, please visit our website.

Life Can be a Risky Business

One family’s experience serves as a painful lesson as to why you must protect yourself and your family with these basic estate planning documents.

Twenty five years ago, a young woman living in Florida suffered a terrible heart attack. Terri Schiavo was resuscitated but sustained massive brain damage that left her in a vegetative state. Her husband, wanted her feeding tube removed, as he believed this would have been her wish. Schiavo’s parents wanted her kept alive. As detailed in Harrisburg Magazine’s article, “Protect Yourself,” the result was seven years of agony for everyone. After 14 appeals and interventions by lawmakers including President George W. Bush, Schiavo’s feeding tube was disconnected. It was a nightmare that could have been avoided if there had been a properly executed and signed living will.

A big issue in this fight was that those closest to her testified she never would have wanted to be kept alive in a vegetative state, but Schiavo hadn’t signed a living will. Therefore, if you fail to have the legal documents necessary to express those intentions, no one will know what they are. Without leaving your written wishes, it takes important decisions out of the hands of your family.

End-of-life directives are just one of the legal documents that are needed to protect us. Wills and powers of attorney (financial and medical) are crucial for sound estate planning. A financial power of attorney allows another individual, like a spouse or trusted friend, to take care of your financial affairs in the event that you become incapacitated, which is particularly useful as you get older.

A medical power of attorney is like a living will, but it details more than deathbed concerns. It also allows your trusted agent to be given your private medical information and to decide health care issues for you if you’re incapacitated.

Wills are extremely important, especially for those with children. They let you name a guardian for your children if you and your partner pass away. This step will prevent the courts from deciding who should care for your children or a dispute by relatives over guardianship. In some states a will is not required, but another legal document specified by state law will suffice.

Even unmarried people without any kids should have a will. If not, state intestacy laws will dictate how your property will pass to your heirs. If you die without a will, the state will distribute your assets to your next of kin. This could be someone you don’t really like or whom you’ve never met.

Everyone has heirs. Even if you think you don’t have anyone, there’s likely a cousin out there somewhere, and the intestacy statute will try to find the next of kin. If you have a properly prepared will, you can leave funds to charity, and make sure that the funds go where you want them to go—instead of to some distant relative with whom you have absolutely no relationship.

Living wills, wills and powers of attorney are not pleasant to consider and may seem unnecessary when people are young and seem healthy. But the Schiavo case is a reminder of what can happen in the absence of proper estate planning.

Reference: Harrisburg Magazine (December 2016) “Protect Yourself”

Please visit our website to learn more about establishing an estate plan that reflects your wishes.

Dreaming of Becoming a Snowbird? Put a Flight Plan in Place

It’s not as simple as packing everything you own and heading south. Careful financial and tax planning and a test run will help avoid major hassles if you decide to follow this well-trod path.

Most people live where they do because of either work or family or both. But when retirement is on the near horizon, dreams of moving and starting a new chapter in a new location begin for many Americans. According to a study from Merrill Lynch, people believe that they are free as birds to decide where they live at around age 61.

CNBC’s recent article, “A financial flight plan for snowbirds,” says that it's not surprising to see retirees move, at least part time, to their dream destination. More than a third of retirees surveyed, told Merrill Lynch that they’d already moved, and another 27% anticipated moving soon. But before you begin splitting time between two or more states, think about which state you want to be your primary place of residence, or domicile because you can have multiple residences—but only one domicile.

You should consider the advantages of choosing one state instead of another, like the fact that there are several warm weather states that don’t have a state income tax. Others have tax breaks on retirement income and on real estate taxes for older residents. Estate taxes can also be more favorable in some states than in others.

Once you’ve decided, be prepared to show the government that the state you picked is truly your domicile state. Some states have investigated people who say they’re now residents in other states and who say they don’t owe any taxes.

Each state has its own requirements to prove residency. For example, some basics are heading to the local DMV and changing your driver's license, as well as changing your mailing address and tax return address. A big mistake people make is having their income tax return sent to the wrong state. That can be a bad move, since the federal government and state governments share this type of data.

You should also speak with an experienced estate planning attorney in your new domicile state to be certain that all of your financial and estate-planning documents, like your will, powers of attorney, and healthcare or medical directives, still are legal under the laws of your new state.

Don’t forget to change your auto insurance policies so that you are properly covered in both states.

Our advice? Rent in the new state before you buy. You might find that you miss seeing your grandchildren and children, or that your dream location isn’t exactly what you thought it was. This is a big change at a critical point in your life. If you change your mind, that house that was such a bargain may become a financial disaster, if you want to sell it fast.

Reference: CNBC (December 8, 2016) “A financial flight plan for snowbirds”

To learn more about estate planning laws and your estate plan, please visit our website.