According to the US Government Administration on Aging, “70% of the people who turn 65 can expect to use some form of long-term care during their lifetimes.” Also, according to the Administration on Aging, “one-third of today’s 65 year-olds may never need support, but 20 percent will need it for longer than 5 years.”
So, based upon the skyrocketing costs of long-term care, and the odds that two-thirds of us may someday need long- term care, should we plan ahead? The answer is YES.
In 2009, approximately 42 million people in the United Stated regularly provided care to an adult who required assistance with daily activities. Another 61.6 million provided care at some point during the year. As the nation’s population ages, more Americans will likely be required to assist aging or disabled parents and other loved ones. Unfortunately, caregivers are not always authorized to make medical decisions for the people they provide assistance to.
One of the easiest and most important steps an individual can take is to create an advance care directive. An advance care directive will generally include a durable power of attorney, a living will, and name a health care proxy. A durable power of attorney will designate an individual to make financial decisions for an incapacitated person. A living will provides instructions for care at the end of a person’s life and will normally specify whether artificial measures such as life support should be used. A health care proxy is similar to a power of attorney except it designates someone to make medical treatment decisions for a person who is no longer able to make such decisions or communicate with doctors.
Understandably, discussing an aging parent’s medical wishes is not always easy. By creating an advance care directive, an individual may be able to alleviate some of the decision-making burden often placed on family members such as children. Oftentimes, loved ones may disagree with one another regarding an individual’s care, or children may have a difficult time making tough medical decisions for a parent. An advance care directive can eliminate emotional obstacles and prevent a caregiver from being required to petition a court for decision-making authority through a guardianship or conservatorship.
Because Wisconsin residents are living longer, their chances for becoming incapacitated before they die have increased dramatically in recent years. Recognizing the potential for incapacitation as part of your Wisconsin estate plan is important in order to avoid unnecessary legal battles and guardianship proceedings (sometimes called “living probate”).
If the capacity of an individual was unclear at the time their estate plan was created, the documents may be questioned either by those who seek to inherit, or by a probate court. Luckily, demonstrating the capacity to create a will or other planning document in is fairly easy and according to now codified Wisconsin case law, anyone who objects to a decedent’s testamentary capacity must do so “by clear, convincing, and satisfactory evidence.” Still, it is important to create your estate plan before an unexpected illness or incapacitation arises.
Today, most estate plans in Wisconsin will include a revocable living trust, a will, a power of attorney for both healthcare and finances, and a living will. A revocable living trust, financial power of attorney, and health care power of attorney will normally name someone else to take over decision-making in the event of the creator’s incapacity. In this way, a comprehensive estate plan preemptively provides for any potential impairment. Additionally, a thorough estate plan may spare your loved ones from going through the process of living probate.
IRA’s can be complex and confusing sometimes. There are so many rules and laws that must be followed to avoid penalties. One common area of confusion surrounds the required minimum distribution (RMD). The RMD is simply the minimum amount that an IRA holder must withdraw from their account once they hit the mandatory age to avoid being hit with penalties. This mandatory age varies from state to state but is typically age 70 ½ in most states.
When dealing with any aspects of your financial life, especially your IRA’s, it is always best to consult a financial planner that has experience in IRAs and tax laws.
Required minimum distributions seem to create the most questions when it comes to traditional IRAs. One of the most common questions pertains to taxes. Will the RMD be taxed? This depends on how your IRA is set up. If your IRA contributions are done pre-tax, then the answer to that is yes. You will pay taxes on the RMD. If you had your contributions taxed at the time of the contribution (which is not the typical scenario) you will not have your distribution taxed. Just remember that at some point taxes will have to be paid on this money. If you didn’t pay taxes when you made the contribution you will pay taxes at distribution.
The young often think of themselves as invincible in the sense that in their protected world, nothing bad can happen to them, especially with their parents around. Studies show that over 90% of adults under 35 do not have a will, providing reasons like:
- It’s not necessary.
- It’s too complicated for me to deal with right now.
- It’s too expensive.
- My parents will take care of all that.
- I won’t need it for a long time anyway.
- It takes too much time
According to surveys done by USA Life Expectancy, adults aged 15 to 34 rarely die from medical causes but the figures are high for accidents, poisoning, suicide, homicide, and injuries. This suggests that for young adults, death often comes unexpectedly. Continue reading
Top 5 Universal Estate Planning Mistakes to Avoid
As the saying goes, “Death and taxes are something you simply can’t ignore.” Both are inevitable and although most people understand this phenomenon and in turn, prepare by paying their taxes on a quarterly or yearly basis and others set up their estates to ensure that their affairs are in order and their families are protected when they make their transition. For many, however, death is simply too scary, painful and heart wrenching and many people choose to not even think about it. Most realize that they will eventually pass on and have a general mental vision of what they want to happen to their estate but, for one reason or another, they fail to write it down or even when they do, they don’t keep it regularly updated. In fact, studies as recent as the last quarter of 2015 show that only 34% of Americans have a drafted will, while 69% have considered it but delayed doing anything concrete. Continue reading
A coherent strategy for the transfer of assets is, of course, crucial to the success of any estate plan. But the best-laid plans will fall far short of expectations if the trusts so carefully drafted are never properly funded.
If the trust is the car, the funding is the fuel. Without gas in the tank, that beautiful sedan with the precision engine is just metal on four wheels. It’s not going anywhere. The same holds true for an estate plan . Until it’s properly funded, the “plan” is just a plan – a plan that can’t be executed. Like the car with the needle on empty, it’s not going to take you anywhere.
With basic wills, most of the funding happens after death through the probate process. By contrast, a trust can – and should – be funded while the trust maker is still alive. With proper trust funding we can assure that the client’s designated assets will be governed by the terms of the trust agreement. Without it, assets not properly transferred to the trust will generally fall to probate.
Will I Owe Estate Tax?
You may have read recently a great deal about the debate regarding estate tax making it appear as if avoiding estate tax is the most important reason why individuals and couples need to prioritize estate planning. However, this is simply not the case. In fact, with the current federal estate tax exemption of $10.68 million for married couples and $5.43 million for individuals, estate tax is not an issue for the majority of individuals who need to begin the estate planning process.
Top Reasons Why You Need an Estate Plan
If avoiding estate tax is not a priority for you in the estate planning process, one or more of the following common reasons for estate planning probably apply in your case. Continue reading
Owning and operating a small business is the dream of many Americans. Through hard work and dedication, this dream comes true for many people. Unfortunately, if the small business owner becomes incapacitated or dies without a Business Succession Plan, all of the hard work by the small business owner could be lost. Having a Business Succession Plan as part of your estate plan ensures that the business you worked so hard to build will continue to operate even though you are unable to manage the business.