Homestead Laws – What Happens If a Spouse Is Not on the Deed?

Homestead Laws = When one spouse has paid for or inherited the family home and the other spouse has not contributed to its purchase or upkeep, the spouse who purchased the home has to take proactive steps. Otherwise, the other spouse will inherit the home and have the right to live in it, lease it, visit once a year or do whatever he or she wishes to.

It’s their home, says a recent article from the Houston Chronicle titled “Navigating inheritance when husband is not on the deed,” and remains so, until they die or abandon the property.

In this case, the woman is the buyer of the home and she wants her son to have the house. The son will eventually own the home, but as long as the husband is alive, the son can’t take possession of the home or use it, unless given permission to do so by the husband.

The husband may remarry, and if so, he and his new wife may live in the home. If she dies before he does, according to Texas’ homesteading laws, the homestead rights don’t transfer to her. At that point, the son would inherit the home and the new wife would have to move out.

The husband doesn’t get to live in the house for free. He is responsible for paying property taxes and maintaining the house. If there is a mortgage, he must pay the interest on the mortgage, but the woman’s son would have to make principal payments. The son would also have to pay for the homeowner’s insurance.

However, there are options:

  • Move to another state, where the laws are more in the woman’s favor.
  • Sell the home.
  • Ask the husband to sign a post-nuptial agreement, where he waives his homestead right.
  • Get divorced.
  • Gift or sell the home to the son now and rent from him.

The last option is risky. If the son owns the home, there is no protection from the son’s creditor’s claims, if any, and the woman would lose her property tax homestead exemptions. If the son needs to declare bankruptcy or sell the home, or dies before his mother, there would be nothing she could do. If the son married, his wife would be an owner of the home. He (or she) could even force his mother out of the home.

Speak with an estate planning lawyer to see if gifting the house to your son is a good idea for your situation.

Reference: Houston Chronicle (Nov. 13, 2019) “Navigating inheritance when husband is not on the deed”

 

Comments Off on Homestead Laws – What Happens If a Spouse Is Not on the Deed?

How Long-Term Care Services and Supports Compare Across the United States

Many Americans have little or no retirement savings. When they retire, the hard, cold reality hits them. They cannot afford to live in the community, where they raised their children. They will have to look for a less expensive place to live. One of the most significant expenses for aging adults is long-term care. If you are looking at different options for where to settle for your golden years, you should explore how long-term care services and supports compare across the United States.

The AARP Public Policy Institute compiles a reference book every year, called “Across the States: Profile of Long-Term Services and Supports.” Over the last 25 years, the book has grown to include thousands of data points and valuable analysis to make sense of the numbers.

The 2018 edition of the AARP reference book contains a wealth of information for people wanting to find a state that offers generous services and support to seniors. You can find information by state about things like:

  • The current age demographics and expected numbers for the future
  • How many people in the state are disabled
  • How much care costs in that state
  • Information on the numbers of family caregivers
  • Services available in the home and community
  • Nursing facilities
  • The long-term services and supports which Medicaid provides in that state
  • Demographic data about income, poverty and living arrangements
  • Private long-term care insurance statistics (95 percent of Americans do not carry this insurance)

We do not have a national system that provides Medicaid-funded long-term services and supports (LTSS). Unlike Medicare, Medicaid programs are different in every state. Medicare does not provide long-term care services, so most people rely on Medicaid to pay for some of all of their LTSS. One state might have all the services you need at little or no cost, and a neighboring state might provide much less assistance. Some people improve their quality of life immensely, by moving to a nearby state.

Differences in State LTSS Programs

The 2018 AARP report is 84 pages long, so we cannot cover all the details in this article. Here are a few of the highlights:

  • Some states (including New Mexico) spend 73 percent of their total LTSS funds on home and community-based services (HCBS) for the elderly and disabled, compared to only 13 percent in some other states (Kentucky and New Hampshire). Adequate care services in the home and community can make it possible for a person to continue living at home, rather than having to move into a nursing home.
  • Some states are spending less on LTSS and HCBS now than they did in 2011.
  • Southern states have higher rates of poverty among older adults than other regions of the country. Fewer than 30 percent of the people age 65 and over in Alaska, Hawaii, New Hampshire, and Maryland live below 250 percent of the national poverty level. This compares to 42 percent of older adults living in Mississippi, Louisiana, Tennessee, New Mexico, Kentucky, Alabama, Arkansas, and West Virginia. Since part of the Medicaid funds come from state sources, a poorer state will have more people in need but fewer dollars to fund the services they need.
  • The demographics about people in need encompass more than just poverty. Cognitive difficulties and self-care needs are factors as well as income. These needs vary significantly from one state to the next. Only five percent of older people in Colorado have self-care needs, compared to 11 percent in Mississippi. Only six percent of older people in South Dakota have cognitive challenges, compared to 12 percent in Mississippi.
  • Medicaid spent a total of $75 billion on home and community-based care services for older adults in 2013, compared to family caregivers, who provided services worth $470 billion in that year.
  • Oregon has 121 units in assisted living and residential care communities per 1,000 people age 75 or older. Louisiana only has 20 units per 1,000 people in this age group.
  • Only seven percent of people living in long-term care facilities in Hawaii receive antipsychotic medication, compared to 20 percent in Oklahoma.

You should consider many factors when evaluating where to live when you retire. Get information from multiple sources. Get advice from friends, relatives and social services agencies.

Every state makes its own regulations. Be sure to talk with an elder law attorney near you to find out how your state might differ from the general law of this article.

References:

AARP. “Across the States: Profiles of Long-Term Services and Supports.” (accessed October 31, 2019) https://blog.aarp.org/thinking-policy/across-the-states-profiles-of-long-term-services-and-supports

AARP. “Across the States 2018: Profiles of Long-Term Services and Supports.” (accessed October 31, 2019) https://www.aarp.org/ppi/info-2018/state-long-term-services-supports.html?CMP=RDRCT-PPI-CAREGIVING-082018

 

Comments Off on How Long-Term Care Services and Supports Compare Across the United States

What You Need to Know About Continuing Care Retirement Communities

With all the different types of residential options for seniors today, it is easy to get confused by the terminology. If you are trying to decide which choice is right for you or your loved one, you need to evaluate several kinds of arrangements. Here is what you need to know about continuing care retirement communities.

A continuing care retirement community offers a continuum of care, from independent living for people who need no assistance, to assisted living that offers some services, to nursing home care that provides skilled nursing care. A person or couple usually move into the level they need, with the option to move to either more independence or more services as their needs change.

The benefit of a continuing care retirement community (CCRC) is you do not have to move to a different facility when you need more medical attention or if your health improves. You would have to move to a different part of the community, that is usually in a separate building. However, all levels of care are at one campus or physical location.

The drawbacks of CCRC include:

  • These facilities tend to be more expensive than stand-alone centers. There is usually a sizeable entrance fee, ranging from $10,000 to $500,000.
  • The monthly expenses of living in a CCRC make these facilities out of range for low-income and most middle-income seniors. On top of the rent, there is a monthly maintenance fee that can range from $200 to more than $2,000.
  • There might not be a vacancy in the section to which you want to move, so you might have to go on a waiting list or move out of the CCRC to get the level of care you need. If you move out, you can lose the entrance fee you paid.
  • Usually, you do not own the place where you live, even though you might pay more than the market value of the building.

On the other hand, CCRCs have advantages, like:

  • A broader range of activities and services than stand-alone facilities.
  • Getting to stay close to the friends you have at the CCRC, when your needs change.
  • More options for independent living, like apartments, houses, duplexes and townhomes.
  • The CCRC arrangement creates a social network and helps residents get through grief when a spouse passes. Residents of CCRCs tend to have less social isolation and higher activity levels as widows or widowers, than people who live in single-family homes that are not part of a CCRC.
  • Because CCRCs have so many ongoing activities and the facilities include a range of opportunities for physical exercise, like swimming, yoga, tennis, golf, walking and dance, seniors in these communities tend to stay healthy and socially engaged.
  • Many CCRCs have barbers, hairdressers, grocery stores, coffee shops and retail shops onsite for the convenience of residents.
  • You can tailor your services to your desires. One resident might only want lawn care and snow removal. Another person might want housekeeping, meal preparation and transportation.

Make sure that you get detailed written information about all the costs for each service the CCRC offers and for all levels of care. Get the facility to tell you in writing what happens to your entrance fee, if you move from the facility. Compare at least three CCRC developments, if you decide that a CCRC is the option you prefer and can afford.

References:

A Place for Mom. “Continuing Care Retirement Communities.” (accessed August 21, 2019) https://www.aplaceformom.com/planning-and-advice/articles/continuing-care-retirement-communities

 

Comments Off on What You Need to Know About Continuing Care Retirement Communities

Should I Roll A 401(k) into a Variable Annuity or Fixed Annuity?

We’d all like to have guaranteed income after retirement, but there are a few risks to think about before you roll a 401(k) into a variable annuity or fixed annuity. There may also be major fees incurred by annuitants, because you risk losing part of your investment if you die prematurely. You may not be able to pass the rest of the annuity on to your beneficiaries.

Investopedia’s recent article asks “What Are the Risks of Rolling My 401(k) Into an Annuity?” The article says many insurance companies advertise the tax benefits of annuities, but a traditional 401(k) is already tax sheltered. A delayed rollover could mean more taxes.

Extra Fees. The big benefit of annuities is that they give you guaranteed income. However, there are some important differences between the income generated by fixed compared to variable annuities. Most annuity investments are made by people looking to ensure that they are provided for in later life. However, you’re likely to see some major expenses if you own an annuity, in addition to your capital investment. The types of fees from your insurance company will vary, depending on the type of investment you select.

Variable annuities usually have higher fees than fixed annuities, because they require a more active, engaged management style. Annuities that protect your principal or guarantee your balance can’t decrease, but have even higher fees. There also may be one-time up-front costs, like a sales commission or a contract fee.

If you decide to withdraw your initial investment early, you’ll be hit with a big surrender charge, starting at 7% and gradually decreasing over the first seven to ten years of account ownership.

Risk of Loss. If you pass away before you use up your 401(k) savings, your named beneficiary will inherit the account. However, if you die before you get the full benefits from your annuity, the insurance company may keep the rest of your savings. Many annuities have the option of having the contract pay over the course of your life and then transfer to your spouse if you die first. Of course, there may be a fee for this. Ask questions and read the fine print.

Tax Trade-Offs. A financial advisor may recommend annuities, because your investment grows tax deferred. That means you pay no income tax on your gains, until they’re withdrawn. However, if your investment capital is already in a traditional 401(k) or IRA account, a rollover to an annuity gives you no additional tax benefits. Earnings on 401(k) funds are already tax deferred, just like your original contributions. As with an annuity, you don’t pay income tax on your contributions or interest until you withdraw those funds after you retire.

Short Time Limits. Another issue to review when rolling over your 401(k) into an annuity, are the tax implications of the rollover itself. While the IRS permits tax-free rollovers from qualified retirement plans, you must complete the transaction within 60 days. Otherwise, you may lose 20% of your balance. Any amount you don’t roll over is taxable as ordinary income, which can substantially increase your tax liability for the year. If you have a direct rollover from trustee to trustee, you can avoid this.

Reference: Investopedia (July 15, 2019) “What Are the Risks of Rolling My 401(k) Into an Annuity?”

Suggested Key Terms: Variable Annuity, Fixed Annuity, 401(k), Retirement, Insurance Company, Tax Deferred

Comments Off on Should I Roll A 401(k) into a Variable Annuity or Fixed Annuity?

Choosing an Active Adult Community

For couples considering a move to an age-restricted community, the number of choices is larger than ever before. Interest in age-restricted communities is strong. In fact, according to Next Avenue’s article “How to Choose a 55+ Active Adult Community,” builder interest in these communities hasn’t been this robust since 2008.

How can you determine which is the best for you?

There are small, city-based apartment complexes, single family houses on gated golf courses and mammoth communities with more than 9,000 residents. Many are owned by their occupants, but an increasing number are rentals. At least one of the owners or occupants must usually be at least 55.

You’ll need to know exactly what you can afford. In addition to rent or a mortgage payment, most communities have a homeowner’s association or community fee. They can be around a hundred dollars a month or more.

While some communities have restaurants on site, fees don’t cover meals or health care. The monthly fees go towards maintenance of facilities and general exterior care, like lawn care, snow removal and community facilities, like a club house or a pool.

Run the numbers to be sure the costs of a new home will work with your retirement budget.

How active is the community? Some communities have club houses, organized activitie, and busy social schedules. Some take big trips, like cruises, with residents. Others have few structured activities. Take a look at the schedule—if everything looks like fun, then you’re looking at the right place.

What about your changing needs? You may arrive in the community as a healthy young retiree, but over time your needs will change. Does the home feature “universal design” that will be manageable as you age? This includes no-step entries, single-floor living, wider hallways to accommodate wheelchairs and a walk-in shower.

Take a look outside of the community as well. Are there things that you want to do in the area, like bicycling, shopping, visiting a museum or seeing a live performance? If travelling is important, how far is the community from major highways or an airport? For many retirees, living near a college community is an added boost for the ability to audit classes and attend shows, lectures and festivals.

Another way to future-proof your retirement home is considering where your children and grandchildren are living. Today’s retirees aren’t necessarily looking for golf courses and tennis courts. They want to be near family, and that often means moving to where their children live. Some couples wait to make relocation decisions, until they know that their children are staying put.

Reference: Next Avenue (June 12, 2019) “How to Choose a 55+ Active Adult Community”


Comments Off on Choosing an Active Adult Community

Student Loans -How Will Billionaire Robert F. Smith’s Help of Morehouse College Student Loans be Taxed?

Billionaire Robert F. Smith told nearly 400 graduates of the historically black, all-male Morehouse College in Atlanta at their May graduation ceremony that he would pay off those student loan obligations, so they were free to pursue their next chapters. The gift is believed to be worth $40 million.

Graduates likely won’t face any tax liabilities on the money. The IRS will consider the money a “gift.” The IRS policy is “no tax on receipt.” This means typically the person who receives the gift doesn’t have to pay tax on it.

Fox Business’ article “Will the IRS tax Robert F. Smith’s gift to Morehouse grads?” explains that the lender didn’t forgive the debt, so there’s no cancellation of indebtedness income. The students also didn’t do anything to “win” the debt repayment, such as winning a lottery or another competition.

However, Smith’s situation might be a little more complicated, depending on how he plans to pay the debts.

A gift is generally not considered deductible, unless it’s given in the form of a charitable contribution. So if Mr. Smith were to pay the checks directly from his personal account, he wouldn’t be able to claim a deduction. However, he could structure the payments in a way such that he’s giving the money to a charitable organization. This could be giving it to the school for the specific purpose of paying the students’ loans. In addition, Smith could create a private foundation and transfer the money that way.

To use a charitable deduction, Smith would have to give the money to an established charitable organization.

Another option is for Smith to claim that he made the decision to advance his business reputation with the thought of raising income for himself or his business. He started the private equity firm Vista Equity Partners and has an estimated net worth of $5 billion, according to Forbes.

The gift tax exclusion amount in 2019 is $15,000 per year. This means that gifts up to that amount are not usually taxable. For gifts above that, the giver may be required to fill out a Form 709, or gift tax form.

Research shows that outstanding student loan debt has doubled over the past decade to more than $1.5 trillion in 2018. This debt is now second only to the amount of mortgage debt held by Americans.

Reference: Fox Business (May 20, 2019) “Will the IRS tax Robert F. Smith’s gift to Morehouse grads?”

 

Comments Off on Student Loans -How Will Billionaire Robert F. Smith’s Help of Morehouse College Student Loans be Taxed?