As we navigate our serious and surreal reality, we are spending more time at home. This provides a good opportunity to have discussions with your family about planning for your future. Indeed, I often hear families say that estate planning involves more thought than they had anticipated. That’s because a good estate plan depends on comprehensively addressing your needs and wishes starting today through the end of your life.
Estate planning involves discussions on relationships, finances and mortality. These are not easy topics to consider at any point of your life, but such times remind us that they are necessary. One silver lining to our current situation is that we now have more time together to partake in them. You can help your aging parents start thinking about who will step into their shoes if they lose their ability to make decisions for themselves or talk to your adult children about ensuring that their minor children are taken care of should something happen to them.
To help you get started, here are quick tips that will save you and your loves ones time, thought and legal expenses down the road:
1. Make sure you have a healthcare directive in place. A healthcare directive allows you to select who will step into your shoes to make medical decisions for you when you cannot speak for yourself. Who will be responsible for your medical care if you lack the ability to make decisions for yourself? The person(s) you select is known as your agent(s). Start thinking about who your agent will be and speak with him or her to obtain your agent’s address and best contact number.
2. Make sure you have a financial directive in place. A financial directive allows you to select who will step into your shoes to make financial decisions for you if you cannot speak for yourself. Who will pay your medical bills? Who will make mortgage payments on your behalf? Again, start thinking about who your agent will be and to speak with him or her to obtain your agent’s personal information.
You can have different agents for different directives. If you do so, it is a good idea to make sure the people you select can work well with each other. For more detail on #1 and #2 and top tips on how best to make these work for you, read here.
3. Start important conversations with yourself and others. Now is the time to speak with
loved ones about being a trustee of your trust or an executor of your will. These are the
individuals who will administer your trust or will and carry out your wishes upon your passing.
And if you aren’t ready to have these conversations, then at least consider who will carry out these roles on your behalf and what your objectives will be. Who should get which assets? Do you have minors who need care if something were to happen to you right now? And so forth.
4. Compile a list of important people, accounts and documents/valuables. Do you use a financial advisor? An accountant? Do you have online banking accounts? Credit card rewards programs? Start creating a master file of information for your agent, the trustee of your trust, and the executor of your will. Be sure to at least include:
a. The name, address, email address and contact number for accountants, advisors and investment professionals you work with.
b. Log-in credentials (i.e., usernames and passwords) for online accounts you maintain.
Without it, your loved ones may not be able to access your accounts. As an additional
safeguard, make sure you discuss these digital assets with an attorney who can help you plan for this in your estate planning documents.
c. A location of where important documents/valuables are kept. Write down where original documents are kept for your agent, trustee and executor. If you have any valuable personal property you are keeping for specific people, you should write down the item, who you will be gifting it to, record their value and document the location where they are kept.
5. Update beneficiary designations. For most financial, retirement and life insurance
accounts, you can designate a beneficiary who will inherit your account upon your death. If done correctly, these designations avoid probate. Such designations should be reviewed
periodically to ensure that they still fit your wishes. You should also select and review
contingent beneficiary designations for these accounts -- i.e., who will inherit your account if
your beneficiary predeceases you.
To be sure, we are living in unprecedented times, but there are some silver linings. One of these is that we now have more time to be proactive about our future. Estate planning is one way in which you can take care of your loved ones while remaining in control and maintaining peace of mind. We encourage you and your loved ones to get started.
We are here to help. Please email or call us.
The Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act) was signed into law on December 20, 2019 by President Donald Trump. This new federal law significantly changes the landscape for retirement account planning. Here are some major changes that could impact your estate plan:
New rules: Under the new rules, only an eligible class of beneficiaries can stretch distributions over their lifetime. This class includes:
All other beneficiaries are now required to fully take distributions from the inherited IRA account within 10 years of the accountholder’s death. This shorter time period can result in some significant tax bills.
In light of this, consider reviewing your estate plan to reevaluate your retirement and estate planning strategies. If you made beneficiary designations under the prior laws, it may be wise to consult with an estate planning attorney to see if modifications need to be made.
2. The maximum age for traditional IRA contributions is repealed.
Old rules: Prior to January 1, 2020, the maximum age to make contributions to traditional IRAs was 70 ½. Indeed, you could not make contributions during the year in which you turned 70 ½ or any year thereafter.
New rules: The new legislation repeals the age restriction on worker contributions to traditional IRAs. This will provide a valuable tax deduction and enable you to save more for retirement. As Americans work and live longer, this additional amount of time to save for retirement will be extremely beneficial.
3. The age when retirees must take Required Minimum Distributions is now increased.
Old rules: Prior to January 1, 2020, you were required to start taking withdrawals from a traditional IRA by April 1 of the year after you turned age 70 ½. These withdrawals are known as required minimum distributions.
New rules: The SECURE Act increases that age limit to age 72. This change gives you more time to let the investments in a retirement account grow tax deferred.
4. New parents can take penalty free withdrawals.
Old rules: Prior to the new law, if you took a withdrawal from your IRA or 401(k) before age 59 ½, the amount would usually be subject to income tax and a 10% penalty. The IRS did make some exceptions to this for penalty-free early distributions from some types of retirement accounts for specific circumstances involving hardship, such as an expensive medical emergency or to purchase health insurance after a job loss.
New rules: The SECURE Act adds an additional exception to this list. You are now allowed a $5,000 withdrawal from an IRA or 401(k) after the birth or adoption of a child. It’s a good idea to consult with an estate planning attorney to ensure you meet the conditions necessary to take advantage of this new option.
Want to ensure your needs and goals are being met after the passage of the SECURE Act? Call us at (312) 584-8852 or email us.
“I’m sorry, but you need capacity to execute advance directives.” As I heard a sigh on the other end, I relived a painful scenario all too familiar to estate planning and elder law attorneys. The dreaded conversation in which you have to inform an already overwhelmed individual that her family must go to court to have the court decide who will step into her shoes to make decisions for her because she can no longer speak for herself.
Conversations like these gave me the impetus to offer free community presentations and consultations across the Chicago-land area. Just as I advise my parents, I also advise people that advance directives are an equally important part of their estate plan. It’s become a personal mission to make this information accessible.
Estate planning and elder law are areas where misinformation spreads quickly. The unfortunate consequence is that people do not take advantage of options they have until it is too late. One common example is advance directives -- that is, documents that an individual executes to choose who will speak for her in the event she cannot speak for herself. Advance directives typically consist of a power of attorney for property to cover financial, asset and real estate decisions; a power of attorney for healthcare to cover medical, end-of-life and burial decisions; and a living will. With advance directives, you remain in control and determine what is best for you.
Advance directives are for everyone. That’s right, everyone. They are just as vital for the college student who goes away from home and wants to be sure mom and dad can access his medical records and make medical decisions for him should something happen to him as they are for the young couple who wants to make sure they are clear on who will step into their shoes to make decisions for them that could impact their children. And of course, they are a major source of comfort and relief to young-at-heart who want peace-of-mind on Medicare, end-of-life planning and burial plans.
People frequently think that these documents take effect upon death, i.e., “my power of attorney is there to make decisions when I die.” Not exactly. Your agent under your power of attorney is there for you in your lifetime in the event that you cannot make decisions for yourself -- that is, when you lose capacity. Here’s a quick illustration of when you enter into advance directives and when they take effect:
Capacity is required to execute advance directives. Once you lose capacity, you also lose the ability to execute advance directives. If you have lost capacity and do not have advance directives in place, then your family will be forced to go to court and seek a determination from the court as to who is the best decision-maker for you.
Frequently, people associate a loss of capacity with aging-related medical issues such as dementia or Alzheimer's. But there are unexpected scenarios that can also impact us cognitively, such as an accident, unexpected illness, etc. This makes it critical to start on advance directives sooner rather than later. We may not be able to predict the future, but we do have the ability to prepare for it through advance directives.
In my presentations and 1:1 sessions, here are some tips I provide:
1. Don’t delay, start today. You must have capacity to execute advance directives. Thus, the best time to make an advance directive is before you need one. Otherwise, you cannot guarantee that decisions will be made according to your values, priorities and preferences.
2. Consider your needs comprehensively. Advance directives are best entered into when you have the time and energy to consider your needs comprehensively. They allow you to plan for various stages of life: going away to college, when you become a parent, when you start using Medicare or Medicaid and when you want to document your burial wishes. Planning ahead when you have the time to think will ensure that your directives are more robust.
3. Select an agent you trust. Advance directives are about ensuring that your values and wishes are honored. Pick someone you trust to carry out your wishes. You can pick different agents for different directives, but make sure the agents work well together. For example, your agent under your power of attorney for healthcare will handle medical care decisions, but your agent under your power of attorney for property will handle your medical bills.
4. Be clear about the powers you are delegating to your agent. The range of decision-making you can delegate is broad -- from making medical decisions to gifting your assets to assist with tax planning. It is up to you to determine the scope of decisions your agent can make on your behalf. Be clear by recording any limits or additions in your advance directives.
5. Choose the right attorney for you. Advance directives involve discussions of family relationships, finances, and death. So, choose someone with whom you feel comfortable disclosing these details. It’s equally important to pick someone who has experience. The directives are flexible and adaptable, so select someone who knows how to make them work best for you. As someone who has reviewed DIY powers of attorney gone wrong, I can tell you that the cost of an experienced attorney is much less than the cost of finding out these are invalid after someone has lost capacity.
Fundamentally, advance directives are about your autonomy and self-determination. If you forgo this step in your estate plan, or handle it improperly and lose capacity, then your loved ones will be forced to go to court to seek the court’s determination on who is best to make decisions for you. Most people aren’t comfortable with that.
So, what are you waiting for? Get started now! If you need help with this, please feel free to get in touch by calling us at (312) 584-8852 or drop us an email.