December 2019 | K.T. Williams Law

New Retirement Account Rules: Review and Update Your Estate Planning Soon.

December 20, 2019/in Estate Planning /by KT Williams

Earlier this year the U.S. House of Representatives passed a bill to change many rules about retirement accounts, such as Individual Retirement Accounts (IRAs). But the bill stalled in the Senate. The support in Washington was overwhelming, so it was just a matter of time before it would pass. And the time has come. The changes are here! So let’s explore the changes.

Required Minimum Distributions (RMDs) Not Required Until Age 72.

For many years, the law required a retirement account owner to begin taking minimum distributions by age 70 ½. Otherwise, severe penalties would apply.

Under the new law, an account owner can delay minimum distributions until age 72. This will allow those who do not need distributions to keep their retirement accounts intact longer. As a result, retirees will enjoy larger retirement accounts during retirement and higher balances may remain at the owner’s death. This potential for larger retirement accounts at death is offset by another provision in the law.

Mandatory Withdrawal of Inherited Retirement Account: 10-Year Rule

The law has allowed the owner of an inherited retirement account to take distributions from the account over the life expectancy of the beneficiary. Beneficiaries are usually much younger than the previous owner. So this allowed the payout of the retirement account to stretch over a long period of time.

The new law requires the owner of an inherited retirement account to withdraw the full balance of the retirement account within 10 years of inheriting it. The effect of this change could be huge. Although there are a few exceptions to the 10-year distribution requirement, they are narrow.

The changes will force the complete distribution of the account over a shorter span than under prior law. This means taxes on the retirement account distributions will be paid sooner, and the taxes will be higher. Everyone with retirement accounts should review their estate planning to determine how the changes will affect them personally.

What Should You Do?

The best way to protect yourself from surprises and higher taxes is to be proactive. Evaluate your retirement accounts and your estate planning soon. Determine how the new laws will affect you and your family. Then, make changes to your estate planning for better protection and lower taxes. If you’re not sure how to get started, get your Estate Planning/Elder Law Attorney, financial advisor, and accountant involved. Estate Planning/Elder Law attorneys, like me, along with your financial advisor and accountant are your financial team. We are here to help you each step of the way. Contact us so we can help you. And let your friends know we are here to help them, too.

Long Term Care Insurance: Don’t Overlook It.

Over the years, I’ve worked with countless families. Many of them have been facing what we will probably face at some point: how to pay for nursing home costs, assisted living, or in-home care for an aging family member.

Rarely does anyone want to see their life savings spent on nursing home or similar care. For most people, any other option seems better than that. Estate planning that includes planning to pay for those costs provides some alternatives. And for some people, due to health or other reasons, estate planning may be the only option. But for many others, long term care insurance would be the best option. No one should overlook long term care insurance as they consider how they’re going to pay for care as they age. Just this week, I was reminded of the benefits and peace of mind given a family whose loved one planned ahead with long term care insurance.

Does Long Term Care Insurance Only Pay For Nursing Home Care?

No. Most long term care insurance policies cover the cost of care in a variety of settings, including in-home and assisted living in addition to the nursing home. In contrast, the estate planning/elder law planning options may only result in nursing home costs being covered by Medicaid. The in-home care and assisted living costs that may precede nursing home care remain subject to being paid out of our own savings. The insurance allows us more choices about where our care or our loved one’s care will be provided without incurring significant out of pocket expenses.

Does Long Term Care Insurance Protect Your Assets?

Long term care insurance can protect your assets in a couple of ways. First, it serves as the initial source of funds to pay for care. As a result, you aren’t dipping into your own pocket or your savings to cover the costs. If the cost of care doesn’t exhaust the benefits of the insurance policy, your savings may never be touched.

Additionally, if your insurance policy is part of the state’s long term care insurance partnership program, you get added asset protection. In addition to serving as the first source of payments for care, the insurance benefits paid for care will create asset protection (an asset disregard) in the event Medicaid is needed after exhausting the insurance policy benefits.

The partnership program policies work this way. If you have a policy that is part of the partnership program and it pays $200,000 in benefits before it is exhausted, Medicaid will disregard $200,000 of your assets when you apply for Medicaid. In other words, Medicaid will pretend that you don’t have $200,000 in assets that you really have. That means Medicaid won’t require you to spend the $200,000. Instead, you’ll keep it intact.

I’ve seen this in action recently, and the savings can be substantial. For the $200,000 policy, not only did the policy provide the first $200,000 to cover costs of care, the policy shields $200,000 of your life savings that Medicaid would have required you to spend before Medicaid starts paying. The combined benefit from this type of insurance is hard to ignore.

If You Don’t Use The Insurance, Are You Wasting Your Money?

No, although that is a common concern. When you buy insurance, you are buying a promise: the promise that protection is there if you need it. But do we really want to need this insurance? Probably not.

We would all prefer to live a long, healthy life that never requires in-home, assisted living, or nursing home care. But that is not likely. We know that we’ll probably need care in some or all of those settings. This insurance protects us when that happens.

The scenario with long term care insurance is similar to our automobile insurance and homeowners insurance. We may never file a claim on either of those insurance policies. Yet from the time we’re 16 years old, we’ll probably pay automobile insurance premiums. We don’t think we’ve wasted those premiums simply because we haven’t had a wreck. Instead, we’re glad we haven’t had a wreck. The same holds true for our homeowners insurance except we probably didn’t start paying homeowners insurance premiums until much later in life. Either way, though, we’re happy that we didn’t have to file a claim.

Also, there are many types of long term care insurance policies and several types of insurance that include coverage similar to long term care insurance. To learn about the variety that may be available to you, your financial advisor or a dedicated long term care insurance agent can help. Some policies are similar to your automobile insurance or homeowners insurance described above. With long term care insurance policies like those, there isn’t any remaining or residual value in the policy at death. Other policies containing benefits similar to long term care insurance may retain some residual value at death. You will hear them called hybrid policies.

How Do You Determine If Long Term Care Insurance Is Right For You?

You should get your estate planning/elder law attorney and your financial representative/insurance agent working with you and one another. As a team, you’ll discover what options are available to you and the benefits and costs of those options, and you’ll determine which is best for you. One of the most common regrets I hear when I ask if someone has long term care insurance is that they didn’t look into it soon enough. Our health affects whether we can qualify for the insurance, so don’t delay. Determine today that you will explore the long term care insurance options available to you. You don’t want the regret of having missed a good opportunity simply because you waited too long. I’m here to work with you and your financial representative/insurance agent on this journey. Contact us to get started.

Family Meeting: The Time Is Right.

December 6, 2019/in Estate Planning /by KT Williams

We live busy, hectic lives. Because of that, it’s easy to put off doing important things, such as planning for the future. Yet we know we’ll have to face certain things in the future, including our retirement, our potential need for assisted living and nursing home care, and our death.

While we may be in full control of all aspects of our lives for a few of those events, we won’t be in control for all of them. And, frankly, we probably won’t have as much control of any of them as we would like. That means other people will be involved, too. Our financial advisors, our accountant, our insurance agent, and our estate planning/elder law attorney should be involved. But those closest to us, such as our spouse, children, siblings, and maybe even our parents will play important roles and shoulder a heavier burden at those times. So we should consider what each role is likely to be and take steps to make it as easy as it can be on them and us. One way to do that is through a family meeting.

What Is a Family Meeting?

A family meeting can take many different forms. It can be a scheduled time set aside for the meeting. Or it can be impromptu when most or all of those who should be involved are present. Family meetings around the holidays are very common because, even in our busy lives, we usually carve out enough time to visit around Thanksgiving or Christmas.

Regardless of the formality or impromptu nature of how the meeting arises, it involves an ingredient that can’t be overvalued: communication. Communication is the hallmark and focus of a family meeting.

What Is Communicated in a Family Meeting?

Parents usually initiate a family meeting. But, occasionally, children will initiate a family meeting. This is most common when a meeting should occur and no one else is stepping up to coordinate it.

Whether the parent or a child initiates the meeting, the meeting sets the stage for the parent to tell others their wishes. They may explain who they want to serve in fiduciary roles such as executor, trustee, or attorney in fact. They may tell the family how they feel about organ donation, life support, and end-of-life care. They may tell the family how they want their assets distributed after their death. And they may take this opportunity to tell stories of their life that have been important to them, to reflect on good times, and to spread the love and value they have for their family. Much good can come from a family meeting. But be prepared for some challenges that can arise.

What Challenges Arise with Family Meetings?

When we get frank, open communication from others, we may hear things that sting. I’ve heard plenty over the years. It’s not easy to take. But we can grow and benefit from even the toughest truth.

Family meetings allow for frank, open communication. And all involved need to truly listen to what is said and how it is said. It’s an important show of respect to everyone else who is there.
In the meeting, we may disagree. Can we express disagreement with patience and kindness? Hopefully so. But consider if an even better option is keeping our mouth shut. We must remember our role in the meeting. If we are a child whose parent is explaining what is important to them, is it proper for us to tell them why we disagree with them and why we want it a different way? Probably not, and that’s especially true if others there are giving us the “I wish you would shut up” look when we start talking. Even though communication is good, it’s not always easy.

Why Have a Family Meeting?

Have a family meeting because it allows those who care for you to know what matters most to you and so that you will know what matters most to those you care about.

Have a family meeting because it opens a door for communication that will lessen the opportunity for misunderstanding.

Have a family meeting because you don’t want to one day find yourself saying “I wish we had talked about that.”