Harvard or Shady Oaks? How to Choose Your Financial Priorities

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There are any number of things for which you can be earning and saving money: investments, retirement, college, a home, a car, the current high-tech gadget… The thought of it all is enough to make a person dizzy!  So how do you decide what are the most important things for your family’s financial happiness and security right now, and years down the road?  Choosing your financial priorities requires taking stock of the present, a lot of thought about the future, and a little bit of help from trusted advisors.

Robert Brokamp has written an article entitled “Should You Save For College Or Retirement”, which focuses on helping families and individuals organize their financial priorities.  In spite of the title of his article, what Brokamp really stresses that there is more to good financial health than just college or retirement; a good financial future means taking care of your finances now by paying off credit cards, building an emergency fund, and having adequate insurance.

Building a strong financial future includes more than just planning for college and for retirement, it should also include planning to ensure your family’s financial security should something happen to you.  Brokamp alludes to this in his article when he mentions purchasing an adequate life insurance policy, but he neglects to mention how little that policy will actually provide if your assets are eaten up after your death by estate taxes, probate fees, or a young and spendthrift son or daughter.

When it comes to your financial health, our firm may not be able to help you with the credit card fees, but we can help with the rest—especially ensuring that your efforts to save right now will not go to waste years down the line.

Stuck In The Middle: Caring For Aging Relatives

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“Too rich for most government-funded social programs and not rich enough to pay for full-time, long-term care services.”

Does this sound familiar?  It is exactly the kind of financial situation most elderly find themselves in today, and one which requires many adult children who are still raising their own kids to also care for their parents.  That is the situation in which Michelle Singletary, Washington Post staff writer, finds herself in today.  In her W.P. article Prepare now for a future that might include caring for your elderly family, she describes the feelings of frustration, admiration, and obligation that come with caring for her elderly father-in-law.

Singletary writes movingly about the realities of caring for an aging relative, but what she seems most determined to convey is that it is never too early to start thinking about what your own parents’ future holds. “If you have even an inkling that you may become the caregiver for an aging parent or relative, start planning for it now. Ask questions about the person’s finances. Collect information from community and nonprofit organizations. Get your own finances in order because you’ll probably have to pitch in financially.”

Part of planning for your aging parent or relative is thinking about Medicaid, Long-Term Care Insurance, and the best way to save and protect your assets.  Call our firm and let us help you—and help your aging parents.

Prenups Help With Happily Ever After

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A lot of what we as estate planners do is help you protect your assets: We help you protect your assets for your children when you die, we help you protect your assets when you are elderly and need long term or nursing care, we help you protect your business or investment assets from frivolous law suits… but we can also help you protect your assets during marriage.

“During marriage?” you may ask, “Why would I need to protect my assets during marriage?  I would trust my spouse with my life.” This may be true (in fact, we very much hope it is true) but statistics show that more than 50% of marriages end in divorce, yet according to this article by Robin Epstein and Amy Epstein Feldman only 3% of marrying couples bother to create a prenuptial agreement. The low number may speak for the optimism of marrying couples, but not for their common sense.

A prenuptial agreement is not an admission that you don’t really think your marriage is going to work.  On the contrary, prenuptial agreements can be useful in many situations, not just in cases of divorce.  If you are entering into a second marriage and have children from a previous marriage a prenuptial agreement is absolutely essential to ensure that your children are entitled to any assets you bring from your previous marriage. If you or your fiancé comes to the relationship with heavy debts a prenuptial agreement can ensure that your marriage doesn’t begin under the weight of all that debt. And a prenuptial agreement can be a precursor to your eventual estate planning.

If you are planning a wedding in the near future, our firm can help answer any questions you may have about prenuptial agreements without any obligation.  But really, knowing the many ways a prenup can protect you, your spouse, and your children—is there any reason not to have one?

Trade Like A Man, Save Like A Woman

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How will you be planning for your retirement? According to CNBC your gender could play a bigger role than you think in your retirement plan. While of course not everyone will adhere to gross generalizations, studies have shown that men and women do have a tendency to take a different approach to saving and investing for retirement. Which way is the right way?  Well, as John Ameriks points out in the article, “It’s not a matter of one gender being right and the other wrong… You just need to be aware of the differences when you’re making investing decisions.”

The differences may not be as surprising as you think.  Here are some of the things CNBC had to say about how men and women invest and save:

  • Men tend to be overconfident about their investing and retirement planning skills.
  • Women generally prefer less risky investments.
  • Men don’t plan for a long retirement.
  • Women save more over time.

Considering the fact that our society still tends to view the stock market as “a man’s game”, and one with which women aren’t quite as comfortable, it makes sense that a man would be more confident with frequent buying and selling, while a woman might tend to go for the safer investment requiring less action and attention over the long haul. But lack of attention doesn’t necessarily mean lack of awareness.  Women tend to worry more than men about security in their Golden Years.  The article posits that this is because many men don’t expect to live much past 80, but another possibility is that men have more confidence in their ability to earn a living at any time in their lives; whereas women (who are often the ones to leave the job market in order to care for family) are more afraid of having to depend on an outside source for their livelihood.

Part of planning for your retirement is planning for your estate.  Whether you are a man or a woman, adventurous or conservative, a trader or a saver—your retirement plan and your estate plan need to be in line with each other.  Our office can help ensure that your retirement and estate plans are compatible… both right now and decades down the line.

Robin Hood Lives On: Tax Breaks to Help Your Family

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It may seem like you just can’t catch a break when it comes to paying taxes, but according to this article in the Wall Street Journal there are a few little known tax breaks that could end up saving your family money.  Some are new—so new, in fact, that it is still before the Senate—such as the tax exemption for employer provided cell phones and smart phones; and some—like the tax free income homeowners can earn if they rent out their home for 14 days or fewer during a year—have been around for a few years.

Of particular interest to our clients is the gift tax exclusion (another lesser known tax break that has been around for a few years.) As stated in the article, “Anyone may give anyone else up to [$13,000] per year in cash or property, free of gift tax. One partner of a married couple can double the gift and the exemption. So a couple with three married children and six grandchildren could give away over $300,000 a year, tax-free.”

We say that this gift tax exclusion may be of particular interest to our clients because if you are looking for a way to lower your estate tax, or anticipate applying for government medical services in the next few years, giving gifts to loved ones right now may help you achieve your goal—if you go about it the right way.

Contact our office for more information on how any of these “Robin Hood” tax saving techniques may help your family this year.

Take Action in the Face of Estate Tax Uncertainty

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If you’ve been reading our blog regularly then you know that the 2010 estate tax repeal has caused no end of confusion and uncertainty; not only for those who have been dealing with probate and trust administration since the tax was first repealed, but also for those who are trying to think ahead and do the right thing for their spouses and children.  Many people have come to the erroneous conclusion that they have no choice but to stand by and wait until the Washington politicians make up their minds about whether or not to restore the estate tax retroactively—but we’re here to tell you that you don’t have to wait to protect your assets and your family.

Forbes.com recently published an article entitled How to Protect Your Family From Estate Tax Uncertainty.  This article suggests that there are a number of steps you can take right now to protect your heirs and your assets, even if you don’t know what changes lawmakers may enact tomorrow or 2 months from now. Their suggestions include everything from working with your estate planning attorney on contingency plans to account for anomalies such as no estate tax or minimum exemptions, to common sense action items such as taking the time now to track your cost basis for assets (to help your executor and heirs determine the change in value for tax purposes.)  The Forbes article also suggests that some people may want to plan to save by giving—taking advantage of the gift tax exemption amounts.

There are always steps you can take to ensure that your estate plan is up to date, our firm can be your compass and your guide; we can help your family prepare for whatever the future may have in store.

Does the New Health Care Reform Affect Your Long Term Care Plan?

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From a recent announcement on PR Newswire:

“Many Americans seem confused and immobilized by a key part of the recent Health Reform legislation, the CLASS Act, which will offer a form of long term care insurance for working people and others who may become disabled. ‘CLASS’ stands for Community Living Assistance Services and Supports, and the program, a legacy of the late Senator Edward Kennedy, is intended to offer new choice and security for millions now at risk. But, ‘we find that the public doesn’t know how to react,’ says Denise Gott, Chairman of the Board of LTC Financial Partners LLC (LTCFP), one of the nation’s most experienced long term care insurance agencies.”

The new Health Care Reform will almost surely affect your long term care plan, but is it too soon to know exactly how? You don’t want to be caught without coverage, but you also don’t want to make any decisions without having all the facts.

To help you discover how health care reform may affect your long term care plans, the link above provides access to a newly released 2010 Long Term Care Guide complete with healthcare reform update.  Don’t let your family be caught off-guard.

Recent Deaths Bring Home the Consequences of No Estate Tax in 2010

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There was too much confusion to be much rejoicing when the estate tax was repealed for a year on January 1st, 2010. Although the words “no estate tax” may sound good, nobody really expected the state of affairs would last. Most experts believed that Congress would never actually let it happen in the first place; then when ’09 became ’10 without any action on the estate tax repeal that the George W. Bush administration had put into place experts warned people not to get too comfortable, that a retroactive estate tax would likely be implemented.

Well, we’re 4 months into 2010 and there is still no retroactive estate tax—but there is also still no rejoicing. This is because the lack of estate tax has actually created more problems than it has solved for the wealthy and affluent. According to this article in Financial Advisor Magazine the recent deaths of Texas billionaire Dan Duncan and Taco Bell founder Glen W. Bell, Jr. have only made it clear to tax attorneys that “lawsuits of various kinds will blossom in the estate-tax vacuum. The more money left on the table when the wealthy die, the more likely heirs are to fight for years over who should inherit.”

And you don’t have to be a billionaire to feel the consequences of the lack of tax. This article in Bloomberg Businessweek explains that those who think they’re catching a break on the estate tax could instead “…wind up paying stiff capital-gains taxes on inheritances. That’s because of the disappearance of what’s known as the “step-up” in basis, which allowed assets to be revalued for tax purposes at the time of death.”

But even this is preferable to finding yourself unintentionally disinherited by standard estate tax clauses included in older wills and trusts, a scenario that is more likely to happen than you may think if your spouse or parent hasn’t had their estate plan reviewed yet this year.

What is the bottom line? Every silver lining has a dark cloud, and you want to take every precaution possible to keep your heirs safe from the storm during this “gap year” in the estate tax.

Family Feuds: Your Estate Plan Can Save Your Kids’ Relationship

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Parents want to think the best of their children, but the fact is that many adult children lose their perspective in the wake of the death of a parent and end up permanently damaging their sibling relationships.  When mom or dad dies the hurt and emotion takes over; insecurities come out, deep-seated rivalries make themselves known, and logic goes out the window. What all of this can lead to is years and years of brothers and sisters taking each other to court, spending thousands of dollars of your estate fighting over mementos and heirlooms, and lifetime relationships in shatters. . . Unless you have an estate plan.

A recent article by Scripps Howard News Service explains that the best way to prevent this from happening to your children is by creating a good estate plan. A good estate plan can be a great comfort to your children, and can save them thousands of dollars in probate and legal fees; and most importantly, a good estate plan is very clear about your intentions for your assets, leaving no room for court battles or ugly disagreements. But getting that good estate plan takes time and forethought—and the help of a professional.

A good estate plan takes into account the relationships and personalities of your heirs, as well as your own wishes.  If one of your children has a problem with substance abuse, or if two of your children had a fight 10 years ago and still don’t speak, those things are considered in the creation of the plan.  A good estate plan deals with small items and family heirlooms with emotional value, as well as real property and valuable liquid assets. A good estate plan is created with the idea of creating the best future for your heirs; it doesn’t leave the difficult decisions to be made by others when you’re gone.

If you would like to know more about how to smooth the way for your children and grandchildren, contact our office.  We can help you create not just a good estate plan for your situation, but the best future for your family.

A “Graying Trend” In Caregiving

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What will you be doing when you’re 73?  If you think you will have earned the right to have someone take care of you, think again; you may end up serving as a caregiver for someone else.  A recent article in the New York Times describes a new trend in caregiving: the elderly are being cared for increasingly by the elderly. According to the article, “Professional caregivers — almost all of them women — are one of the fastest-growing segments of the American work force, and also one of the grayest.”

As odd as it may sound, the arrangement of 55-75 year olds caring for 85-100 year olds often works out beautifully.  Older caregivers may not be able to do much heavy lifting, but what they are able to do is connect with their charges.  Many older caregivers have already spent months or years caring for their parents or spouse, so they have an understanding of the fear, frustration and stress the families are going through.  In addition, because older caregivers often share similar culture and experiences, the relationship can end up turning into a friendship, as with the case of Grace Jackson and Mary-Lou O’Neill:

“Grace Jackson, who is 101, said she never wanted a helper at home and resented Mary-Lou O’Neill, 73, when she arrived four years ago at Ms. Jackson’s daughters’ insistence. But as their relationship has grown, ‘It’s developed into a friendship,’ Ms. Jackson said, adding that friends who had younger aides were often offended by their manners or language.”

The down side to this “graying trend” in caregiving is that most of these elderly women—in spite of how they excel and make the best of their situation—become caregivers because they have to, they can’t afford to retire completely, even at the age of 70 or 75.  The time to think about your own future is now. Talk to your advisors about planning for your own retirement; because although you may have everything it takes to be a wonderful caregiver in your senior years, the fact is that you may not want to.