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Does Surviving Spouse Get Their Social Security Benefits?

Surviving Spouse – Most people don’t understand how Social Security works for themselves or their loved ones. Here’s one major misconception: you can’t file early for Social Security and then get an increased level of benefits once you’ve reached Full Retirement Age, or FRA. This is one of many common errors, according to a recent article “When You Claim Social Security Can Have Huge Implications for Your Spouse” from Kiplinger. Once you’ve started taking benefits before your FRA, your lower level is set for life.

Another common error happens when married couples don’t understand how their benefits impact each other. If your spouse depends on your Social Security benefits to pay the bills, you both need to gain an accurate understanding of how surviving spouse benefits work.

Let’s that say a couple retires and both decide to take their Social Security benefits right away. One is 66 and the other is 62. The older, Pat, receives $3,000 monthly. The younger spouse, Penny, will receive $1,900. Their total household benefit from Social Security is $4,900. If Pat dies first, Penny will lose her own benefit and receive only Pat’s $3,000 monthly benefit. If this is the only income, Penny may face some serious financial challenges.

If Pat started taking benefits earlier than his FRA, at 64 instead of 66, his monthly benefit would be $2,625. If he were to start taking benefits at 62, his Social Security benefit will be even smaller. The reductions are permanent, and they also impact a surviving spouse’s monthly benefit.

What can you do to maximize your spouse’s survivor benefit? Wait for as long as you can to claim your Social Security benefits. For every year you wait, you earn an extra 8% in delayed benefits. These increases grow until age 70, at which point your Social Security benefit reaches the maximum.

Not everyone can afford to delay their benefits. However, when possible, it makes a big difference to the surviving spouse, who is statistically likely to be the female spouse. For couples who can afford to delay benefits, couples with significant age differences and couples where one of the two has exceptionally good health or comes from a family with longevity, this is a worthwhile approach.

Delaying benefits means the loss of benefits during the years until age 70. Forgoing several thousand dollars a month may not be possible for everyone.

If your surviving spouse won’t be able to make ends meet without both Social Security benefits, there needs to be a plan to somehow bridge the gap. How this is done depends upon the individuals and their families. Every situation is different. It is not an easy situation to address. However, one thing is certain: ignoring it will not make the problem go away.

Reference: Kiplinger (April 20, 2022) “When You Claim Social Security Can Have Huge Implications for Your Spouse”

 

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Does Power of Attorney Perform the Same Way in Every State?

A power of attorney is an estate planning legal document signed by a person, referred to as the “principal,” who grants all or part of their decision-making power to another person, who is known as the “agent.” Power of attorney laws vary by state, making it crucial to work with an estate planning attorney who is experienced in the law of the principal’s state of residence. The recent article from limaohio.com, titled “When ‘anything and everything’ does not mean anything and everything,” explains what this means for agents attempting to act on behalf of principals.

When a global or comprehensive power of attorney grants an agent the ability to do everything and anything, it may seem to the layperson they may do whatever they need to do. However, each state has laws defining an agent’s role and responsibilities.

As a matter of state law, a power of attorney does not include everything.

In some states, unless certain powers are explicitly stated, the POA does not include the right to do the following:

  • Create, amend, revoke, or terminate a trust
  • Make a gift
  • Change a beneficiary designation on an account
  • Change a beneficiary designation on a life insurance policy.

If you want your agent to be able to do any of these things, consult with an experienced estate planning attorney, who will know what your state’s law allows.

You’ll also want to keep in mind any gifting empowered by the POA. If you want your agent to gift your property to other people or to the agent, the power to gift is limited to $16,000 of value to any person in one year, unless the POA explicitly states the power to gift may exceed $16,000. An estate planning attorney will know what your state’s limits are and the tax implications of any gifts in excess of $16,000.

These types of limitations are intended to give some common-sense parameters to the POA.

Most people don’t know this, but the power of attorney can be as narrow or as broad as the principal wishes. You may want your brother-in-law to manage the sale of your home but aren’t sure he’ll do a good job with your fine art collection. Your estate planning attorney can create a power of attorney excluding him from taking any role with the art collection and empowering him to handle everything else.

Reference: limaohio.com (April 30, 2022) “When ‘anything and everything’ does not mean anything and everything”

 

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Did Monkee Mike Nesmith Have More Than One Will?

Theirs is evidence that musician Mike Nesmith of the Monkees had several wills. A handwritten will from 2014 was submitted to Monterey County Superior Court in California in December. There’s evidence of at least one other handwritten will from an earlier time. Nesmith’s four adult children are now also saying that there exists a true will created in 1994.

One problem, says Monterey County Weekly’s recent article entitled “Michael Nesmith’s four children claim there’s another will and contest the estate’s worth.” They don’t have a copy of the 1994 will yet, according to court documents filed on March 17.

“Objectors believe that the document is a codicil to the decedent’s will, which he executed in 1994,” the objection states. (A codicil is a legal term for an addition or amendment to, or a revocation of, a previous will.) They’ve sent subpoenas to the estate planning attorneys who drafted the 1994 will, requesting the attorneys to produce it.

The children assert that since Nesmith’s one-page, handwritten will, dated July 8, 2014, doesn’t state that the new will revokes all previous wills, it’s not the true will, only an amendment. That will leave everything Nesmith owns to the Gihon Foundation, which was created in 1977 by his mother Bette Graham, the inventor of Liquid Paper. Nesmith was president of the foundation, and his children are members of the board.

Nesmith’s estate was estimated to be roughly $3.6 million by Mike Nesmith’s business manager and accountant Cynthia Davis, who filed the court papers after his death requesting to be named by the court as the estate’s special administrator.

However, the Monkee’s children say that the estate is actually valued at $1.95 million. They believe that Davis incorrectly included in her estimation assets that are part of a trust, also executed in 1994. That trust leaves all furniture, furnishings, personal effects, vehicles and “all other tangible or intangible personal property” to Nesmith’s ex-wife, Victoria Kennedy, to whom he was married at the time of the 1994 will and trust.

Although the children said they don’t have the 1994 will yet, they did submit as evidence a copy of a one-page document stating that Kennedy will receive his belongings. It’s signed by Mike Nesmith as trustor of the “1994 Presidential Trust,” as well as Kennedy, who’s named as trustee.

A court is expected to resolve the issues at a hearing this spring.

Reference: Monterey County Weekly  (March 23, 2022) “Michael Nesmith’s four children claim there’s another will and contest the estate’s worth”

 

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Should I have a Pour-Over Will ?

A pour-over will is a type of will that’s created in conjunction with a trust. It can help facilitate the transfer of assets, if a trust’s grantor (the person establishing the trust) has failed to transfer all intended assets into the trust. A pour-over will can be an important part of a person’s estate planning checklist. Bankrate’s recent article entitled “Do you need a pour-over will in your estate plan?” gives us more information.

This type of will has a provision that directs the will to “pour-over” any residual assets left in the person’s estate into a living trust that is overseen by a trustee upon the grantor’s death.

A big benefit of this type of arrangement is that it’s a backstop, in case there were assets the grantor didn’t specifically fund into the trust before their death. This allows these assets to avoid the intestate rules (when someone passes away without a valid will), even though they were not specifically part of the living trust.

A person might designate certain assets to be titled in the name of a living trust they’ve established to facilitate passing these assets to the trust’s designated beneficiaries upon the grantor’s death. The trust avoids probate on these assets. However, any assets, such as an IRA or a life insurance policy, that passes on to heirs via a beneficiary designation wouldn’t be eligible for inclusion in this type of trust.

A pour-over will allows the grantor to state that any assets that had not previously been included in the trust should be added to the trust upon their death. Therefore, assets that may have been acquired after the trust was established are eligible for the same treatment as the assets that had already been funded to the trust.

It’s also simple and eliminates the need to decide which heir receives certain assets because everything eventually becomes part of the trust. These assets are, therefore, distributed via the terms of the trust.

It also helps avoid a lengthy probate case due to a significant asset that wasn’t included in the trust or elsewhere.

However, this type of will doesn’t eliminate the probate process. The will still needs to go through probate. There may also be possible legal challenges, which can be costly to litigate and take time to resolve.

Ask an estate planning attorney about a pour-over will as a part of your estate plan.

Reference: Bankrate (April 20, 2022) “Do you need a pour-over will in your estate plan?”

Suggested Key Terms: Estate Planning Lawyer, Pour-Over Will, Intestacy, Probate Court, Inheritance, Will Contest, Trusts, Probate Attorney

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Can a Family LLC Reduce Estate Taxes?

Family LLCs are used to protect assets, reduce estate taxes and more efficiently shift income to family members, reports the article “Handling Estates Like An LLC Can Reduce Taxes” from Financial Advisor. The qualified business income and pass-through entity tax deductions may add significant benefits to the family.

What is a Family LLC? They are holding companies owned by two or more individuals, with two classes of owners: general partners (typically the parents) and limited partners (heirs). Contributed assets of the general partners are no longer considered part of their estate, and future appreciation on the assets are not counted as part of their taxable estate.

Consider the LLC as three separate pieces: control, equity and cash flow. Because of the separation, you can maintain control of the personal/business assets, while at the same time transferring non-controlling equity of the assets to someone else via a gift, a sale, or a combination of the two.

An added benefit—transfers of non-controlling equity can qualify for a discount on the value for tax reporting, minimizing any gift or estate tax consequences of the transfer. Discounting business entities with very liquid assets is generally not advisable. However, illiquid assets could warrant a discount as high as 40%.

These types of structures are complicated. Therefore, you’ll need an estate planning attorney with experience in how Family LLCs interact with estate planning. The LLC must be properly structured and have a legitimate business purpose.

It’s important to note that if a real estate or operating business is put into an LLC and taxed as a pass-through entity instead of a sole proprietorship, they may be eligible for the 20% discount under Section 199A, or for the pass—through entity tax workaround for the limitation of the deductibility of state taxes for individuals and trusts.

Every state has its own rules about income qualifying for a state income tax deduction on the federal level. If you have an entity in place, you’ll want to speak with your attorney to determine if a pass-through entity on the state level will be advantageous. If so, this election may allow for a state income tax deduction on the federal level.

Your estate planning attorney will help you get a qualified appraisal of the assets, since the IRS will require an accurate value of the transfer for reporting purposes, especially if a discount is being contemplated. This is a complex matter, but the estate planning and tax advantages to be gained make it worthwhile for families with a certain level of assets to protect.

Reference: Financial Advisor (April 4, 2022) “Handling Estates Like An LLC Can Reduce Taxes”

 

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Why Is Communication Important in Estate Planning ?

Estate Planning – Successful transition of wealth from generation to generation is best accomplished when family members have a shared understanding of the overall use of the family wealth. While the initial wealth creators have final say about how their assets are distributed, awareness and agreement on the part of the receiving family members regarding how the wealth is used can help preserve assets as they move to the next generation.

Forbes’ recent article entitled “Communication Can Be The Key To Creating Harmony In Multi-Generational Estate Planning” says that coming to an agreement can sometimes be difficult, especially if family members bring their own perspectives and values to the estate planning process. However, good communication can help head off potential multi-generational conflicts before they happen.

One of the most significant challenges in achieving multi-generational wealth preservation is that each individual and generation has a different outlook on wealth. Today’s families could include four or even five generations. This big gap in ages could mean differing perspectives on many topics, including:

  • Personal values. Family members may have different belief systems and values, including how they view work, social and political systems, relationships, and other topics.
  • Investing priorities. Some generations may give greater importance to socially conscious investing than others. This could create a conflict when it comes to how and where to invest.
  • Shifting economic environments. Older generations who have lived through various economic scenarios may have very different perspectives than younger generations, particularly those just coming of age in a time of high inflation and a slowing economy.
  • Communication. Not every generation or family member is comfortable talking openly about money, especially when it comes to sharing how much is involved and how to spend it.
  • View of the role of a financial advisor. Some family members may see a financial advisor as a trusted partner, and others may be more skeptical.

While these differences can create challenges in the estate planning process, you can resolve them and reach an agreement about how to best manage the family’s wealth. Begin with a plan designed for the long-term, spanning current and future generations that’s flexible to meet the family’s changing needs and shifting economic environments.

Reference: Forbes (April 18, 2022) “Communication Can Be The Key To Creating Harmony In Multi-Generational Estate Planning”

 

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My Children Really Don’t Want My Stuff?

Next Avenue’s recent article entitled “Your Top 10 Objects Your Kids Don’t Want” gives us a list of these items and what to do with them.

Books. Unless your grown children are professors, they don’t want your books. If you think the book is rare, call a book antiquarian.

Paper Ephemera. Snapshots, old greeting cards and postcards are called paper ephemera. Did you know that? Me neither. Old photos are not worth anything, unless the subject is a celebrity or linked with an important historical event. Old greeting cards are not valuable, unless handmade by a famous artist or sent by a celebrity. Postcards are valued mainly for the stamps. Take all your family snapshots and have them made into digital files. The other option is to sell those old snapshots to greeting card publishers who use them on funny cards or give family photos to image archive businesses, like Getty. If the archive is a not-for-profit, take the donation write-off.

Steamer Trunks, Sewing Machines and Film Projectors. Thrift stores are full of these items. Therefore, unless your family member was a professional and the item is top-notch, yours can go there as well.

Porcelain Figurine Collections and Bradford Exchange Pieces. Your collections of frogs, shoes, flowers, and trolls, as well your Hummel’s, and Precious Moments won’t be wanted by the children. See if you can find a retirement home that does a gift exchange at Christmas and donate the figurines. If you want to hold on to a memory of your mom’s collection, have a professional photographer take a photo for your wall. Collector’s plates won’t sell. Donate these as well.

Silver-Plated Stuff. Your children won’t polish silverplate, so if you give them platters, serving bowls, tea services and candelabra, you won’t enhance your standing. The exception may be silver-plated items from Tiffany or Cartier but give these away to any place or person who will take it.

Heavy, Dark, Antique Furniture. There’s still a market for this sort of furniture at secondhand shops. However, you’ll get less than a quarter of purchase price, if you sell on consignment. Unless your furniture is mid-century modern, there’s a good chance you will have to pay someone to take it off your hands. Instead, donate it and take a non-cash charitable contribution using fair market valuation.

Persian Rugs. No, these aren’t really in vogue for younger adults. However, the high-end market is still collecting in certain parts of the country, like Martha’s Vineyard. However, unless the rug is rare, it’s one of the hardest things to sell these days. If you think the value of the rug is below $2,000, it will be a hard sell. Like antique furniture, it may be best to donate these.

Linens. No, they don’t want them. They might not even own an iron or ironing board, and they definitely don’t set that kind of table. Give these to needlewomen who make handmade Christening clothes, wedding dresses and quinceañera gowns. You may also donate linens to costume shops of theaters and deduct the donation. A site like P4a.com has auction results to establish the fair market value of such objects.

Sterling Silver Flatware and Crystal Wine Services. Matching sets of sterling flatware are tough to sell because they rarely go for “antique” value. Do the children do a lot of formal entertaining? The same is true for crystal. These sets are too precious, and the wine they hold is too small a portion. Sites like Replacements.com offer matching services for people who do enjoy silver flatware and have recognized patterns. Because they sell per piece, and therefore buy per piece, sellers get a rather good price.

Fine Porcelain Dinnerware. Your grown children may not want to store four sets of fancy porcelain dinnerware and won’t see the benefit of unpacking it once a year for a holiday or event. China is something to consider selling. Know your pattern to get a quote. Some replacement companies buy per piece, so the aggregate of the selling price is always more than a bulk sale at a consignment store, which might be the only other option.

Reference: Next Avenue (March 1, 2018) “Your Top 10 Objects Your Kids Don’t Want”

 

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How to Know If a Last Will Is Invalid

One of the many reasons an experienced estate planning attorney is the best resource for creating an estate plan, including a Last Will and Testament, Power of Attorney and Health Care Proxy, is the confidence of knowing your estate plan has been properly prepared. People who believe they know better than an experienced lawyer, often send their families into a legal, financial, and emotional black hole after they die. The article “Red Flags Indicating a Potentially Invalid Will” from The National Law Journal provides a closer look at why it pays to work with a professional.

When a decedent executes a new Last Will near the end of their life and makes a dramatic change to previous estate plans, there may be trouble ahead. When this is the case, several issues need to be examined to ensure that the document is valid. Strong consideration must be given to whether the person had sufficient capacity to execute the document.

When a person is suffering from an illness or near death, they may be susceptible to the improper influence of people who may cause them to make uncharacteristic changes to their estate plan. Any Last Will drafted within the last few months of a person’s life requires careful review.

If, shortly after a person has handed the reins of their financial life to another, using a Power of Attorney in any of its forms (Durable POA, Springing POA) and a new Last Will is created, a red flag should be raised, especially if the Will has been changed to benefit this person.

What if a person’s capacity was hovering near the borderline of capacity and incapacity? If a decedent’s mental capacity was questionable at the time the Will was executed, the Last Will may not be valid. A person with legal mental capacity must understand the assets they own and clearly understand to whom they are bequeathing assets. The standard for this issue is low, but if the decedent was suffering from a degenerative mental condition or a sudden onset of incapacity due to an illness or accident, the Last Will may be challenged.

If a layperson creates a Last Will or uses an online service to create it and the Will does not comply with the state’s estate laws, the Last Will may have technical issues rendering it invalid. When this occurs, it is as if there were no Last Will at all and the estate is distributed according to the laws of the state.

The biggest red flag is the presence of any large changes from the next to Last Will to the final Last Will, with no known reason for the change having been made. This may be a result of changes to mental capacity or undue influence of a third party. An experienced estate planning attorney is the best resource to create a Last Will. They will be among the first to ask why significant changes from a prior Last Will are being requested.

Reference: The National Law Journal (March 30, 2022) “Red Flags Indicating a Potentially Invalid Will”

 

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How to Get Started on an Estate Plan

CNBC’s recent article entitled “67% of Americans have no estate plan, survey finds. Here’s how to get started on one” reports that just a third of Americans have put an estate plan in place, according to a new survey from senior living referral service Caring.com.

That means that 67% are leaving what happens to them and their assets in case of disability or death up to others, including the state.

What is the biggest reason why they don’t have an estate plan? They just have not gotten around to it, according to 40% of survey respondents.

Meanwhile, 33% say they do not have enough assets to pass on to their loved ones, 13% said the estate-planning process is too costly. A total of  12% said they do not know how to get a will.

Those who have had a serious case of COVID-19 are 66% more likely to engage in estate planning compared to those who have not, according to Caring.com. About 41% of those ages 18 to 34 now see greater need for a will or other estate-planning documents following the onset of the pandemic.

Of course, there’s room for improvement, said Jim Rosenthal, CEO of Caring.com, noting only 48% of people who had a severe case of Covid have a plan in place.

“Even with the big scare of potential impending death, people still don’t run out and take care of what’s not that challenging to take care of,” Rosenthal said.

You should know that you do not need to have a lot of assets to decide where you want the assets you do have to go when you die, or to stipulate your preferences for your end-of-life or other care should you become incapacitated.

The first step is to become as educated as you can and consider consulting an experienced estate planning attorney.

Reference: CNBC (April 11, 2022) “67% of Americans have no estate plan, survey finds. Here’s how to get started on one”

 

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Can My Ex Get Some of My Estate?

For many people, their will is their final communication to the world.

A will states how their property should be distributed upon their death. CNBC’s recent article entitled “Your ex-spouse could inherit your money. How to avoid this and other estate-planning mistakes” says that depending on how you plan, it may have a few some surprises for those who are close to you.

There are a couple of situations where you could inadvertently leave money to people you no longer intend as heirs, much to the surprise of other heirs.

An ex-spouse could get some of your money when you die, if you do not update your beneficiaries under a retirement plan.

Divorce does not automatically change a beneficiary designation, unless the divorce decree includes a stipulation to change it. IRAs are the same, so it is not uncommon for an IRA owner to die without having changed the beneficiary designation after a divorce. It’s usually just a simple oversight.

However, most state laws provide that once a married couple is divorced, ex-spouses lose all property rights.

However, pensions are governed by federal law, formally known as ERISA or the Employee Retirement Income Security Act of 1974. As a result, state rules do not apply.

Pensions are not the only accounts that people tend to forget to update. Bank account beneficiary designations are often hard to find, and circumstances may change from when you first set them up.

While it may be tempting to disinherit someone to whom you are no longer close, it can be a bad idea. That is because it can invite all kinds of issues, like a will challenge.

There is always the chance you may reconcile, even on your death bed, at which point it will be too late to update your will and estate plan. Therefore, leave something less to them and do not say anything bad.

To ensure your wishes are carried out the way you want, work with an experienced estate planning attorney.

Reference: CNBC (Jan. 9, 2022) “Your ex-spouse could inherit your money. How to avoid this and other estate-planning mistakes”

 

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