Law Office of Frank Bruno, Jr.

Author: dev-team

  • Why Do I Need an Estate Plan?

    “Some are sad.
    And some are glad.
    And some are very, very bad.
    Why are they Sad and glad and bad?
    I do not know.
    Go ask your dad.”

    ― Dr. Seuss, One Fish, Two Fish, Red Fish, Blue Fish

    “A will can save one’s family from being put into a quagmired pit of legal conundrum, in case of death (which may even be untimely).” ― Henrietta Newton Martin. Did you know that more than half of American adults—and 78% of millennials—don’t have any basic estate planning documents like a will or living trust? It may not be that much of a shock, since younger adults tend to put off thoughts of estate planning. However, even if you don’t have children or many assets yet, you can benefit from creating an estate plan now. Forbes’s recent article, “6 Reasons Why You Should Have An Estate Plan,” provided six reasons why you should have an estate plan at any point in life:

    Why Do I Need an Estate Plan?
    Plan for yourself.

    A big step in the estate planning process, is deciding who will make decisions on your behalf, if you’re unable to do so yourself. If you become incapacitated, a revocable trust will hold assets for your benefit, while you’re alive and name the individuals you want to receive your property when you pass. Designating an agent under a durable power of attorney to act on your behalf when it comes to financial and legal matters, if you become physically or mentally disabled, can help make certain that any decisions made, are in your best interest. If you can’t make medical decisions for yourself, you should have a healthcare proxy, agent or power of attorney, HIPAA release, and living will.

    Decide How to Dispose of Your Wealth.

    A will names an executor or personal representative who’s responsible for the administration of your estate after you die. He or she distributes property, as you determine in your will. If you have minor children, you can also designate a guardian to care for them in your will. Any life insurance, retirement accounts, or annuities require you to name beneficiaries, so they don’t need to be included in a will.

    Lessen Transfer Taxes.

    One goal of estate planning is to maximize the wealth you transfer to your beneficiaries, along with minimizing transfer taxes. The Tax Cuts and Jobs Act of 2017 expanded the amount individuals may give away at death—or during life—without any transfer taxes. The new law offers an increased exemption amount and portability. That means spouses can share one another’s exemption. You can make annual tax-free gifts up to $15,000 in 2019 (twice this amount for married couples). You can also pay medical and educational expenses for someone else without any gift tax.

    Include Charitable Giving.

    If you have philanthropic goals, an estate plan can help make certain that your objectives are satisfied. You can select a charity that’s important to you, choose the assets you want to donate, and decide—along with your attorney—the best way to make your gift.

    Protect Family Wealth.

    There can also be wealth protection benefits in estate planning through asset ownership arrangements, insurance, limited liability entities, irrevocable trusts and asset protection trusts. These are designed to protect your assets from creditors. An experienced estate planning attorney can help you decide, if one of these options is appropriate for your situation.

    Ready your Family to Receive Wealth.

    You can also prepare the next generation to receive wealth, which can also be helpful in preserving family wealth in the long run. Your estate plan can set out wealth planning goals, facilitate conversations about what wealth means to your family and educate your adult children about financial ideas and the ways in which they can get involved in creating and sustaining the family legacy.

    Why Do I Need an Estate Plan? Estate planning can be a formidable task, especially if you’re starting from ground zero. However, you can always engage an estate planning attorney to help you develop the documents you need to give you peace of mind about your financial affairs.

    Reference: Forbes (February 22, 2019) “6 Reasons Why You Should Have An Estate Plan”

  • Is a Revocable Trust Valuable in Estate Planning?

    Is a Revocable Trust Valuable in Estate Planning?

    “Most of the important things in the world have been accomplished by people who have kept on trying when there seemed to be no hope at all.” Dale Carnegie.

    “In three words I can sum up everything I’ve learned about life: it goes on.” Robert Frost.

    Yes a revocable trust is valuable in estate planning. There’s quite a bit that a trust can do to solve big estate planning and tax problems for many families.

    As Forbes explains in its recent article, “Revocable Trusts: The Swiss Army Knife Of Financial Planning,” trusts are a critical component of a proper estate plan. There are three parties to a trust: the owner of some property (settler or grantor) turns it over to a trusted person or organization (trustee) under a trust arrangement to hold and manage for the benefit of someone (the beneficiary). A written trust document will spell out the terms of the arrangement.

    One of the most useful trusts is a revocable trust (inter vivos) where the grantor creates a trust, funds it, manages it by herself, and has unrestricted rights to the trust assets (corpus). The grantor has the right at any point to revoke the trust, by simply tearing up the document and reclaiming the assets, or perhaps modifying the trust to accomplish other estate planning goals.

    After discussing trusts with your attorney, he or she will draft the trust document and re-title property to the trust. The assets transferred to a revocable trust can be reclaimed at any time. The grantor has unrestricted rights to the property. During the life of the grantor, the trust provides protection and management, if and when it’s needed.

    Let’s examine the potential lifetime and estate planning benefits that can be incorporated into the trust:

    • Lifetime Benefits. If the grantor is unable or uninterested in managing the trust, the grantor can hire an investment advisor to manage the account in one of the major discount brokerages, or he can appoint a trust company to act for him.
    • Incapacity. A trusted spouse, child, or friend can be named to care for and represent the needs of the grantor/beneficiary. She will manage the assets during incapacity, without having to declare the grantor incompetent and petitioning for a guardianship. After the grantor has recovered, she can resume the duties as trustee.
    • This can be a stressful legal proceeding that makes the grantor a ward of the state. This proceeding can be expensive, public, humiliating, restrictive and burdensome. However, a well-drafted trust (along with powers of attorney) avoids this.

    The revocable trust is a great tool for estate planning because it bypasses probate, which can mean considerably less expense, stress and time.

    In addition to a trust, ask your attorney about the rest of your estate plan: a will, powers of attorney, medical directives and other considerations.

    Is a Revocable Trust Valuable in Estate Planning? Ask any estate planning attorney or any person that had to face the mistake of not creating one. Any trust should be created by a very competent trust attorney, after a discussion about what you want to accomplish.

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  • Why Should I Create a Trust If I’m Not Rich?

    Why Should I Create a Trust If I’m Not Rich?

    “Your true assets are the collections of your quality moments on the earth.”
    ― Amit Ray, Mindfulness Living in the Moment – Living in the Breath

    Carve your name on hearts, not tombstones. A legacy is etched into the minds of others and the stories they share about you. —Shannon Adler

    It’s probably not high on your list of fun things to do, considering the way in which your assets will be distributed, when you pass away. However, consider the alternative, which could be family battles, unnecessary taxes and an extended probate process. These issues and others can be avoided by creating a trust.

    Barron’s recent article, “Why a Trust Is a Great Estate-Planning Tool — Even if You’re Not Rich,” explains that there are many types of trusts, but the most frequently used for these purposes is a revocable living trust. This trust allows you—the grantor—to specify exactly how your estate will be distributed to your beneficiaries when you die, and at the same time avoiding probate and stress for your loved ones.

    When you speak with an estate planning attorney about setting up a trust, also ask about your will, healthcare directives, a living will and powers of attorney.

    Your attorney will have retitle your probatable assets to the trust. This includes brokerage accounts, real estate, jewelry, artwork, and other valuables. Your attorney can add a pour-over will to include any additional assets in the trust. Retirement accounts and insurance policies aren’t involved with probate, because a beneficiary is named.

    While you’re still alive, you have control over the trust and can alter it any way you want. You can even revoke it altogether.

    A revocable trust doesn’t require an additional tax return or other processing, except for updating it for a major life event or change in your circumstances. The downside is because the trust is part of your estate, it doesn’t give much in terms of tax benefits or asset protection. If that was your focus, you’d use an irrevocable trust. However, once you set up such a trust it can be difficult to change or cancel. The other benefits of a revocable trust are clarity and control— you get to detail exactly how your assets should be distributed. This can help protect the long-term financial interests of your family and avoid unnecessary conflict.

    If you have younger children, a trust can also instruct the trustee on the ages and conditions under which they receive all or part of their inheritance. In second marriages and blended families, a trust removes some of the confusion about which assets should go to a surviving spouse versus the children or grandchildren from a previous marriage.

    Trusts can have long-term legal, tax and financial implications, so it’s a good idea to work with an experienced estate planning attorney.

    Reference: Barron’s (February 23, 2019) “Why a Trust Is a Great Estate-Planning Tool — Even if You’re Not Rich”

    If you ask yourself “should Create a Trust If I’m not Rich?” then these are the answers for you.

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  • What Will My Social Security Benefits Be?

    What Will My Social Security Benefits Be?

    Your Social Security benefits in retirement are primarily dependent on the wages you get while working. The Social Security taxes deducted from your paycheck are based on that amount. If you’re still working and at retirement age, you can get benefits while earning other income. And depending on your age, you can also decrease and delay your Social Security payouts. The other important factors for determining Social Security benefits include inflation and the formula used by the Social Security Administration in its calculations.

    Investopedia’s recent article asks “How Are Social Security Benefits Affected by Your Income?” The article explains how Social Security income is calculated—the more you earned while working, the higher the income benefit you get from Social Security. The government keeps track of your income from every year, and the part of your earned income subject to FICA taxes is used to determine your benefits in retirement.

    WHAT WILL MY SOCIAL SECURITY BENEFITS BE?

    If you paid into the Social Security system for more than 35 years, the Social Security Administration only uses the 35 highest earning years and won’t include any others in its formula. If you didn’t pay into the system for at least 35 years, a value of $0 is entered for all missing years. After you apply for benefits, these earnings are indexed and used to calculate a “primary insurance amount” that shows the maximum sum you’re eligible to receive after reaching full retirement age. The age when you begin getting benefits is also significant. As of 2018, the youngest age to receive benefits is 62. However, your benefits are reduced if you opt to get them that early. But if you take benefits prior to reaching full retirement age and continue to work, you may be able to delay some benefits to get higher payouts in the future. These days, many folks are working into or beyond retirement age. If you are earning an income while getting Social Security benefits, you may have some benefits withheld if you make up to a certain threshold. Until you reach full retirement age, earning more than the IRS income threshold decreases your benefits by $1 for every $2 earned in excess of the minimum. That money isn’t lost forever. Instead, your Social Security income is upped once you reach full retirement age. Under normal circumstances, your Social Security benefits aren’t taxable. But if your income while taking benefits is more than the maximum limits established by the IRS, your benefits will be partially taxable. Nonetheless, no one has to pay income taxes on more than 85% of benefits.

    Reference: Investopedia (April 4, 2019) “How Are Social Security Benefits Affected by Your Income?”

  • How The Ancient Ones Handled Their Estate Planning

    “I love money. I love everything about it. I bought some pretty good stuff. Got me a $300 pair of socks. Got a fur sink. An electric dog polisher. A gasoline powered turtleneck sweater. And, of course, I bought some dumb stuff, too.” Steve Martin.

    “I made my money the old-fashioned way. I was very nice to a wealthy relative right before he died.” Malcolm Forbes.

    It’s not unusual for a family member to find an old bank account or painting, years after someone has passed and the estate has been closed. If it’s not something of great value, says Above the Law in the article “Old Money, Same Issues: Lessons from the 5th Century in Organizing Your Estate,” it’s easy to handle. Contacting a few members of the family to see who wants a small item, can be a simple task.

    However, if it’s of high value, the family may need to petition a bank, the probate court or even an unclaimed funds bureau for access to the asset, so it can be distributed to beneficiaries or heirs. The testator needs to appoint a meticulous administrator so no stone is left unturned, when the time comes for marshalling all of the assets, before the estate can be closed.

    Israeli archeologists recently unearthed deeply buried stones related to the estate of an ancient Samaritan named Adios. The stone had an inscription that read “Only God help the beautiful property of Master Adios, amen.” The estate is reported to date back 1,600 years to the 5th century. The estate contained stone mechanisms for making wine, flour and oil, including a mill. It was fairly well organized.

    We have now organized people who take care of their heirs and beneficiaries, by listing all of their assets and taking the time to have an estate plan created that includes a detailed will, among other important documents. We are centuries away from inscribed stones, but the game plan is the same: write down the assets, have a will that details what assets go to either people or charitable organizations and prepare for the future.

    If there is no list of assets, there are ways to uncover them. However, it creates a lot of work for the executor and stress for the family, that could be avoided with an estate plan.

    The best evidence of asset holdings are often a decedent’s tax returns. General supporting documentation can reveal useful information about a person’s financial status. A look at a decedent’s paper files can reveal bank accounts, investment accounts and insurance policies.

    If the assets are not properly documented in an estate plan, the monies may end up in a state’s unclaimed funds depository. Real estate, if taxes are not paid, may be seized. Many of the concerns for unclaimed funds can be addressed, by taking the time to create a spreadsheet of information and sharing it with the executor.

    Whether your assets include a stone mill or bank accounts, how the ancient ones handled their estate planning may in fact be different than a modern American. An estate plan that includes clear and organized information about your assets will increase the likelihood that your assets will be distributed and not disappear, until they are uncovered centuries later.

    Related Articles:  “Old Money, Same Issues: Lessons from the 5th Century in Organizing Your Estate,”

  • How Do Trusts Work in Your Estate Plan?

    How Do Trusts Work in Your Estate Plan? A trust can be a useful tool for passing on assets, allowing them to be held by a responsible trustee for beneficiaries. However, determining which type of trust is best for each family’s situation and setting them up so they work with an estate plan, can be complex. You’ll do better with the help of an estate planning attorney, says The Street in the article “How to Set Up a Trust Fund: What You Need to Know.”

    Depending upon the assets, a trust can help avoid estate taxes that might make the transfer financially difficult for those receiving the assets. The amount of control that is available with a trust, is another reason why they are a popular estate planning tool.

    First, make sure that you have enough assets to make using a trust productive. There are some tax complexities that arise with the use of trusts. Unless there is a fair amount of money involved, it may not be worth the expense. Once you’ve made that decision, it’s time to consider what type of trust is needed.

    Revocable Trusts are trusts that can be changed. If you believe that you will live for a long time, you may want to use a revocable trust, so you can make changes to it, if necessary. Because of its flexibility, you can change beneficiaries, terminate the trust, or leave it as is. You have options. Once you die, the revocable trust becomes irrevocable and distributions and assets shift to the beneficiaries.

    A revocable trust avoids probate for the trust, but will be counted as part of your “estate” for estate tax purposes. They are includable in your estate, because you maintain control over them during your lifetime.

    They are used to help manage assets as you age, or help you maintain control of assets, if you don’t believe the trustees are not ready to manage the funds.

    Irrevocable Trusts cannot be changed once they have been implemented. If estate taxes are a concern, it’s likely you’ll consider this type of trust. The assets are given to the trust, thus removing them from your taxable estate.

    Deciding whether to use an irrevocable trust is not always easy. You’ll need to be comfortable with giving up complete control of assets.

    These are just two of many different types of trusts. There are trusts set up for distributions to pay college expenses, Special Needs Trusts for disabled individuals, charitable trusts for philanthropic purposes and more. Your estate planning attorney will be able to identify what trusts are most appropriate for your situation.

    Here’s how to prepare for your meeting with an estate planning attorney:

    List all of your assets. List everything you might want to place in a trust: including accounts, investments and real estate.

    List beneficiaries. Include primary and secondary beneficiaries.

    Map out the specifics. Who do you want to receive the assets? How much do you want to leave them? You should be as detailed as possible.

    Choose a trustee. You’ll need to name someone you trust implicitly, who understands your financial situation and who will be able to stand up to any beneficiaries who might not like how you’ve structured your trust. It can be a professional, if there are no family members or friends who can handle this task.

    Don’t forget to fund the trust. This last step is very important. The trust document does no good, if the trusts are not funded. You may do better letting your estate planning attorney handle this task, so that accounts are properly titled with assets and the trusts are properly registered with the IRS.

    How Do Trusts Work in Your Estate Plan? Creating a trust fund can be a complex task. However, with the help of an experienced estate planning attorney, this strategy can yield a lifetime of benefits for you and your loved ones.

    Reference: The Street (July 22, 2019) – “How to Set Up a Trust Fund: What You Need to Know”

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  • Forgot to Update Your Beneficiary Designations? Your Ex Will Be Delighted

    Forgot to Update Your Beneficiary Designations? Your Ex Will Be Delighted

    Your will does not control who inherits all your assets when you die. This is something that many people do not know. Instead, many of your assets will pass by beneficiary designations, says Kiplinger in the article “Beneficiary Designations: 5 Critical Mistakes to Avoid.”

    The beneficiary designation is the form that you fill out, when opening many different types of financial accounts. You select a primary beneficiary and, in most cases, a contingency beneficiary, who will inherit the asset when you die.

    Typical accounts with beneficiary designations are retirement accounts, including 401(k)s, 403(b)s, IRAs, SEPs, life insurance, annuities and investment accounts. Many financial institutions allow beneficiaries to be named on non-retirement accounts, which are most commonly set up as Transfer on Death (TOD) or Pay on Death (POD) accounts.

    It’s easy to name a beneficiary and be confident that your loved one will receive the asset, without having to wait for probate or estate administration to be completed. However, there are some problems that occur and mistakes get expensive.

    Forgot to Update Your Beneficiary Designations? Your Ex Will be Delighted. Here are mistakes you don’t want to make:

    Failing to name a beneficiary. It’s hard to say whether people just forget to fill out the forms or they don’t know that they have the option to name a beneficiary. However, either way, not naming a beneficiary becomes a problem for your survivors. Each company will have its own rules about what happens to the assets when you die. Life insurance proceeds are typically paid to your probate estate, if there is no named beneficiary. Your family will need to go to court and probate your estate.

    When it comes to retirement benefits, your spouse will most likely receive the assets. However, if you are not married, the retirement account will be paid to your probate estate. Not only does that mean your family will need to go to court to probate your estate, but taxes will be levied on the asset. When an estate is the beneficiary of a retirement account, all the assets must be paid out of the account within five years from the date of death. This acceleration of what would otherwise be a deferred income tax, must be paid much sooner.

    Neglecting special family considerations. There may be members of your family who are not well-equipped to receive or manage an inheritance. A family member with special needs who receives an inheritance, is likely to lose government benefits. Therefore, your planning needs to include a SNT — Special Needs Trust. Minors may not legally claim an inheritance, so a court-appointed person will claim and manage their money until they turn 18. This is known as a conservatorship. Conservatorships are costly to set up. They must also make an annual accounting to the court. Conservators may need to file a bond with the court, which is usually bought from an insurance company. This is another expensive cost.

    If you follow this course of action, at age 18 your heir may have access to a large sum of money. That may not be a good idea, regardless of how responsible they might be. A better way to prepare for this situation is to have a trust created. The trustee would be in charge of the money for a period of time that is determined by the personality and situation of your heirs.

    Using an incorrect beneficiary name. This happens quite frequently. There may be several people in a family with the same name. However, one is Senior and another is Junior. The person might also change their name through marriage, divorce, etc. Not only can using the wrong name cause delays, but it could lead to litigation, especially if both people believe they were the intended recipient.

    Failing to update beneficiaries. Just as your will must change when life changes occur, so must your beneficiaries. It’s that simple, unless you really wanted to give your ex a windfall.

    Failing to review beneficiaries with your estate planning attorney. Beneficiary designations are part of your overall estate plan and financial plan. For instance, if you are leaving a large insurance policy to one family member, it may impact how the rest of your assets are distributed.

    Forgot to Update Your Beneficiary Designations? Take the time to review your beneficiary designations, just as you review your estate plan. You have the power to determine how your assets are distributed, so don’t leave that to someone else.

    Related Article:  “Beneficiary Designations: 5 Critical Mistakes to Avoid.”

    “Life Insurance in My Estate Plan?”

  • Kids Grown Up? Protect Them with These Three Documents

    Kids Grown Up? Protect Them with These Three Documents

    “Right is right even if no one is doing it; wrong is wrong even if everyone is doing it.”  Saint Augustine of Hippo

    “Everybody knows how to raise children except for the people that have them.” P.J. O’Rourke

    Without the right documents in place, you do not have the legal right to protect your own children, once they turn 18, says The National Law Review in an unsettling but must-read article titled “Three Critical Legal Documents Every Parent Should Get in Place Now to Safeguard Their Adult Children.”

    There are only three documents and they are fairly straightforward. There is no reason not to have them in place. If your adult child was incapacitated by an accident or an illness, you would want to speak with the medical staff to find out how they are and what decisions need to be made. Whether you were making a phone call or arriving at the hospital, a nurse or doctor would not be permitted to speak with you about your own adult child’s condition or be involved with making any medical decisions.

    It sounds unreasonable, and perhaps it is, but that is the law. There are steps you can take to ensure that you are not in this situation.

    HIPAA Authorization Form gives you the authority to speak with healthcare providers. This is a federal law (Health Insurance Portability and Accountability Act of 1996) that safeguards who can access an adult’s private health data. HIPAA prevents healthcare providers from revealing any information to you or anyone else about a patient’s status. The practitioners could face severe penalties for violating HIPAA.

    This is why you want to have a HIPAA authorization signed by your adult child and naming you as an authorized recipient.  This will give you the ability to ask for and receive information about your child’s health status, progress and treatment. This is especially important, if your child is unconscious or in an unresponsive state. The alternative? Going to court. That’s not what you want to be doing during a health emergency.

    A Healthcare Power of Attorney or health care proxy needs to be in place, so you can be named his or her “medical agent” and have the ability to view their medical records and make informed decisions on their behalf. Without this (or a court-appointed guardianship), healthcare decisions will be in the hands of healthcare providers only. That’s not a bad thing, if you implicitly trust your child’s doctor. However, if your child is incapacitated in an out-of-town hospital with healthcare providers you don’t know, you will want to be able to make decisions on his or her behalf.

    Note that physicians prefer a single medical agent, not a handful. The concern is that if time is a critical factor and a group of family members do not agree on care, it may compromise the healthcare services that can be provided. You can name multiple agents in priority order. A mother might be listed as the medical agent, and if she is unable or unwilling to serve, the second person would be the father.

    The third document is a General Power of Attorney. This would give you the right to make financial decisions on your child’s behalf, if they were to become incapacitated. You would have the legal right to manage bank accounts, pay bills, sign tax returns, apply for government benefits, break or apply a lease and conduct activities on behalf of your child. Without this document, you won’t be able to help your child without a court-appointed guardianship.

    Keep in mind that these documents need to be updated every few years. If you try to use an older document, the bank or hospital may not accept them. Your adult child also has the ability to revoke these documents at any time, just by saying they revoke them or by putting it in writing. If you have an adult child living out of state, you want to have these documents prepared for your home state and their state of residence.

    Finally, this is not a time to download forms and hope for the best. An estate planning attorney will know more specifically what forms are used in your state and help you make sure that they are prepared correctly.

    Reference: The National Law Review (Feb. 11, 2019) “Three Critical Legal Documents Every Parent Should Get in Place Now to Safeguard Their Adult Children”

    Have your kids Grown Up? Protect Them with These Three Documents: HIPPA authorization, health care proxy, General Power of Attorney.

  • Parents Want Their Children To Be Taken Care Of After They Die

    There are many legal strategies involved in estate planning, including wills, revocable living trusts, irrevocable trusts, durable powers of attorney, and health care documents. New clients often say that they do not have an estate plan. Most people are surprised to learn that they actually do have a plan. In the absence of legal planning otherwise, their estate will be distributed after death according to New York’s laws of intestacy. Of course, this may not be the plan they would have chosen. A properly drafted estate plan will replace the terms of the New York’s estate plan with your own. Reach out to your local Queens County estate planning attorney to create your estate plan.

    MORE ABOUT ESTATE PLANNING SERVICES:

    YOUR LAST WILL AND TESTAMENT – Your last will and testament is just one part of a comprehensive estate plan. If a person dies without a Will they are said to have died “intestate” and state laws will determine how and to whom the person’s assets will be distributed. Some things you should know about wills:

    A will has no legal authority until after death. So, a will does not help manage a person’s affairs when they are incapacitated, whether by illness or injury.

    A will does not help an estate avoid probate. A will is the legal document submitted to the probate court, so it is basically an “admission ticket” to probate.

    A will is a good place to nominate the guardians (or back-up parents) of your minor children if they are orphaned. All parents of minor children should document their choice of guardians. If you leave this to chance, you could be setting up a family battle royal, and your children could end up with the wrong guardians.

    TRUSTS: REVOCABLE LIVING TRUSTS, IRREVOCABLE TRUSTS, TESTAMENTARY TRUSTS, SPECIAL NEEDS TRUSTS, ETC. – Trusts come in many “flavors,” they can be simple or complex, and serve a variety of legal, personal, investment or tax planning purposes. At the most basic level, a trust is a legal entity with at least three parties involved: the trust-maker, the trustee (trust manager), and the trust beneficiary. Oftentimes, all three parties are represented by one person or a married couple. In the case of a revocable living trust, for example, a person may create a trust (the trust-maker) and name themselves the current trustees (trust managers) who manage the trust assets for their own benefit (trust beneficiary).

    Depending on the situation, there may be many advantages to establishing a trust, including avoiding probate court. In most cases, assets owned in a revocable living trust will pass to the trust beneficiaries (or heirs) immediately upon the death of the trust-maker(s) with no probate required. Certain trusts also may result in tax advantages both for the trust-maker and the beneficiary. Or they may be used to protect property from creditors, or simply to provide for someone else to manage and invest property for the trust-maker(s) and the named beneficiaries. If well drafted, another advantage of trusts is their continuing effectiveness even if the trust-maker dies or becomes incapacitated.

    POWERS OF ATTORNEY – A power of attorney is a legal document giving another person (the attorney-in-fact) the legal right (powers) to do certain things for you. What those powers are depends on the terms of the document. A power of attorney may be very broad or very limited and specific. All powers of attorney terminate upon the death of the maker, and may terminate when the maker (principal) becomes incapacitated (unable to make or communicate decisions). When the intent is to designate a back-up decision-maker in the event of incapacity, then a durable power of attorney should be used. Durable Powers of Attorney should be frequently updated because banks and other financial institutions may hesitate to honor a power of attorney that is more than a year old.

    HEALTH CARE DOCUMENTS (OR ADVANCE DIRECTIVES) – An advance directive is a document that specifies the type of medical and personal care you would want should you lose the ability to make and communicate your own decisions. Anyone over the age of 18 may execute an advance directive, and this document is legally binding in NY. Your advance directive can specify who will make and communicate decisions for you, and it can set out the circumstances under which you would not like your life to be prolonged if, for example, you were in a coma with no reasonable chance of recovery.

    A document that goes hand-in-hand with your advance directive is an authorization to your medical providers to allow specified individuals to access your medical information. Without this authorization, your doctor may refuse to communicate with your hand-picked decision maker.

    References:

  • Retirement Is Not Tax-Free

    What many people don’t realize that when they start drawing funds from those 401(k)s, they’re taxed. One of the reasons the accounts are so popular, is that a traditional 401(k) is funded from pre-tax paychecks, so the money deposited into the plan and any gains on the investment are not taxed until the money is taking out. These withdrawals are called “distributions” and there are strict rules about Required Minimum Distributions, known as RMDs.

    In the article “How 401(k) savers can avoid a nasty surprise come retirement,” Market Watch advises readers that these contributions are worthwhile, since they lower taxable income. Contributing enough can even move a taxpayer into a lower tax bracket for a given year, if they are able to do so.

    However, there’s always payback where Uncle Sam is concerned. In this case, when distributions are taken, they are subject to ordinary income taxes. That’s why it’s called a “tax-deferred” account—taxes are deferred or put off. They aren’t tax free.

    People who work in estate planning or personal finance tend to assume that everyone knows this, but that’s not the case. Just as they are about to retire, a great saver may look at their 401(k) balances and be so happy to consider how all their hard work and diligent savings have paid off. However, even if they have a million dollars in an account, the reality is, that $1 million is actually worth more like $700,000, if they are paying federal, state and local taxes. The same is true with balances of any size.

    It is still important to continue saving in a 401(k) or any other kind of retirement account. However, you must keep that tax obligation in mind, when you’re setting any kind of financial retirement goals. Tax rates in the future are unknowns, but plan on roughly 20% in federal tax, and maybe another 3–10% in state and local taxes, depending upon where you live.
    If you use an online retirement calculator to help you plan and estimate your goals and costs in retirement, make sure that the calculator takes taxes into account.

    Everyone’s strategy for building a retirement nest egg is different. However, there are certain rules to consider, based on age. Once you turn 59½, you are allowed to take money from your 401(k) without penalties, but you will probably pay at least 20% in federal income tax, plus state and local income.

    If you are taking withdrawals at this age and still drawing a paycheck, you might be moving yourself into a higher tax bracket. If you turn 65, withdrawing enough to move into a higher tax bracket may also mean that you are paying higher Medicare premiums.

    For those who continue working into their 60s and 70s, a good goal is to preserve your 401(k) accounts for as long as possible. You are not obligated to take any money out of a traditional 401(k), until you turn 70.5. At this point, the Required Minimum Distributions must begin. Legislation pending as of this writing (the SECURE act) may change the age requirement for RMDs, but until the legislation becomes laws, the age remains at 70.5.

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