The benefits of preparing for the unexpected are wide ranging. Avoiding delay, saving money, and earlier care in a health crisis are just a few. In Part 1 of this series, we talked about important first steps to prepare for the unexpected. These steps included making lists of important information such as your bank accounts, investment and retirement accounts, insurance policies, real estate and other assets. Also, you were encouraged to compile a list of all of your electronic login credentials with the corresponding password. Our electronic footprint and widespread use of electronic media, accounts, and storage (our photos in the cloud for example) makes it necessary for us to keep our account login credentials handy for our use and for use by those who may need to help us one day.

Now What? You compiled all the information. What do you do next? In this, Part 2 of the series, let’s cover what you should do after gathering the information.

Keep the information current and updated. You spent valuable time locating, sorting, and compiling the information. Make sure your efforts pay off. Keep the information handy, easily accessible, and up to date. Otherwise, your efforts could end up wasted if the information can’t be found when needed or if it isn’t updated regularly. None of us want to waste our effort. You should check the accuracy of the information every six (6) months or sooner if you get a new electronic account or if your login ID or password changes for any account.

Build Your Professional Advisor Team and Use It. Most people rely on trusted professionals to guide them. Each advisor plays a vital role. And just like other teams that have players with unique skill sets, the members of this team have unique skill sets that serve an important purpose. Leaving a member out of this team could leave you unprepared. If you don’t have a full team, build it. It’s easy. It only takes a call, email, or message. And if you aren’t sure who should be on your team, get suggestions from the other advisors you use.

Financial Advisor, Insurance Agent, CPA, And Estate Planning/Elder Law Attorney. This is your team, and they should work together for you. We each have unique skills and experience, and we use these skills and experience to help you and those who matter to you. When you talk to your team members, tell each one you want them working together.

Preparing for the unexpected in your life justifies spending a little time with these professionals who see the unexpected every day. Your financial advisor, insurance agent, CPA, and estate planning/elder law attorney have seen unexpected and surprising life experiences in their clients and friends and have learned from them. We use that learning to better advise you so that you can avoid the problems others have faced so that you can take advantage of opportunities others have missed. Preparing ahead and being proactive about your future is time, effort, and money well spent. It’s the kind of investment that pays off for a lifetime.

Inform Your Spouse or Power of Attorney. If you are married, you and your spouse may have worked together in gathering all of this information. That’s good. It’s easy to forget in our busy life to tell our spouse something they should know, such as details about retirement options, beneficiary designations, and insurance elections that we may have available. Gathering the information together can help bridge the gap and make sure each of you are aware of your property, accounts, insurance, and retirement benefits. Even if you didn’t gather the information together, you should tell your spouse how to find the information if you intend your spouse to use it one day. If you aren’t married or if you don’t intend for your spouse to access the information, make sure your Attorney-in-Fact (that is the person you named as your agent in your Durable Power of Attorney) can access it. They may need it to help you.

Make Sure You Can Answer These Questions. There are several questions that you should be able to answer. They help determine if you are well prepared for the unexpected. If you can’t answer these questions or if you aren’t certain of the answer, contact your team and get to work. It’s not OK to simply say “some of these questions don’t apply to me because I’m too old or because I’m young and I have plenty of time to worry about it later.” These questions are too important to ignore. Here are a few of them.

1. How are you going to pay for nursing home care? Statistics show that at least 70% of adults will need nursing home care. Nursing home care costs approximately $7,000 per month in our region, and the cost is increasing rapidly. You could use all of your savings and hard-earned assets. That doesn’t sound good to me, and it probably doesn’t sound good to you either. There are plenty of other options. The other options may not be available if you don’t plan ahead.

2. Who is going to assist you and make decisions for you if you become incapacitated? You need a capable, trustworthy person who will take care of your financial and health care needs.

3. Has your estate planning, including your Power of Attorney, been updated to comply with changes in the law and with advances in technology. For example, your Attorney-in-Fact should have authority to access the electronic accounts and memberships you’ve created. If that authority isn’t specifically stated in your Power of Attorney, your Power of Attorney should be updated.

4. Are you taking all of the tax deductions and income exclusions that are available to you? The tax code is complex, and its complexity continues to grow.

5. At what age will you retire and what will your retirement income be when you retire? These questions can be answered even if you are many years from retirement. Helpful tools exist to calculate these figures and to forecast important trends. And this isn’t only for people who are near retirement. If you are young, answering these questions will help you boost your income later and, perhaps, put you on the right track for higher income soon.

6. Do you have the insurance coverage that you need? Insurance is often overlooked, but it is an important part of preparing for the unexpected. The amount and type of health insurance, Medicare supplemental health policies, life insurance, long-term care insurance, or home and automobile coverage that we need varies from person to person and with our stage in life. Reviewing this regularly with your agent and professional team is important. You want the right coverage, not too much and not too little. Be proactive in managing your insurance coverage.

Planning ahead and preparing for the unexpected is time well spent. We never regret planning ahead. But we regret when we don’t. Time is available. Take action now. Don’t wait for the unexpected to happen. Contact us for help.

When thinking about assets and their estate plan, most people focus on who they want to receive the assets at death. And that is an important question to consider. Everyone should know who they want to receive their assets, and everyone should take steps to make sure the assets will reach them. But if we stop there, some unexpected and unfortunate outcomes may occur. Instead, we should consider some tough questions that may prompt more thorough planning.

What If Your Surviving Spouse Remarries or Finds a “Friend”: Will Your Assets and Family Be Protected?

It’s common for married couples, especially those couples who have enjoyed a long marriage, to say they want their spouse to receive all of their assets. Often, the beneficiary designations on retirement accounts and life insurance policies mirror this idea. One spouse is named as the beneficiary for the other. The end result will be that the surviving spouse owns and controls all of the property the couple accumulated.

The surviving spouse as the sole beneficiary may work out well. They may be a thoughtful, caring steward of the property. And perhaps the surviving spouse will only use the property for their needs and the needs of the couple’s children and grandchildren. But what if, unsuspectingly, the surviving spouse meets someone, and a relationship grows. This relationship could blossom into marriage or a deep “friendship.” How does the new relationship affect our estate planning perspective? Usually, it makes a big difference.

Because of the enormous impact a marriage or deep friendship could have on a surviving spouse’s perspective and use of the property, most people want their estate plan to protect what they leave behind. The protections will not deprive the surviving spouse of anything. The surviving spouse will benefit from the assets and have access to the assets for their needs. But the protections will limit the ability of the new spouse or “friend” to take the property for themselves. The end result is that the assets won’t be lost to this new spouse or friend, and the surviving spouse will benefit from the assets as intended.

What If Your Children Get Divorced or Die Much Younger Than You Expect: Do You Want Their Inheritance To Stay In The Family?

When considering where their assets should go upon the death of the surviving spouse, most people with children want the assets to go to them. That makes sense. We want our children to benefit from our efforts. But what if your child gets divorced: will the inheritance be at risk in the divorce? Or what if your child dies much younger than you expect: will the inheritance you left to your child benefit your grandchildren or will it, instead, go to your child’s surviving spouse.

The law tries to protect an inheritance in the event of divorce. Rather than being treated as marital property to be split, an inheritance should be treated as non-marital property of the person who inherited it. But does it always work that way? No. That’s why it is wise to protect the inheritance from the risk of a child’s divorce. You can plan your estate so that your child benefits without losing the inheritance if the child divorces.

Even if the child doesn’t divorce, the inheritance could still end up in the hands of their surviving spouse. This happens when the child dies younger than we expect, and their own estate plan directed all of their assets to their surviving spouse. As we mentioned above, a surviving spouse may find a new spouse or “friend” whose intentions are not pure and who may want to get a piece of the inheritance. To avoid this risk, you can add protections into your estate plan so that your property stays in the family and benefits those in the family who you want to benefit: your surviving spouse, children, and grandchildren.

How Do You Protect Your Assets For Those You Love?

There are estate-planning tools that we can use to protect your assets from the risks mentioned. The most simple and effective one is a trust. Although some people may think of a trust as a one-size-fits-all concept, it is not. A trust is infinitely flexible. We can tailor it to meet your own unique needs and concerns. And through the trust, we can protect your assets for your surviving spouse so that benefits flow to them without losing all the assets to a new spouse or “friend.” And we can use a trust to protect the assets from a child’s potential divorce or their untimely death. That way, the assets stay in the family and benefit your children and grandchildren the way you want. Contact me to explore this and other ways to make sure your property will pass to those you want. We don’t want to see your property lost to others who may not care for your family the way you do.

What Is A Special Needs Trust and Why Is It Important?

A Special Needs Trust provides financial and other assistance to someone without causing them to lose government benefits. Government benefits that a Special Needs Trust helps protect includes Medicaid, SSI (social security income), and low-income housing benefits, just to name a few. Also, a Special Needs Trust allows us to protect assets from nursing home costs when someone goes to a nursing home.

Strict guidelines must be met in order to receive many government benefits. These guidelines include limits on the amount of income and assets the individual may have. Unfortunately, government benefits may not be sufficient to cover all of an individual’s needs. So, family members – usually parents, grandparents and siblings – step in to help. But their help could lead to unintended consequences, such as a loss of SSI and Medicaid.

The loss of SSI and Medicaid is devastating. For many people with special needs, SSI is the sole source of income, and Medicaid is their only way to get much-needed healthcare and medications. And someone who receives government benefits has already experienced a challenging journey. Qualifying for benefits is difficult and stressful. No one wants to go through this long, difficult process again. Fortunately, a properly drafted Special Needs Trust avoids the risk of losing the benefits.

How Do You Create A Special Needs Trust?

Usually a parent or grandparent establishes a Special Needs Trust for a family member who has special needs. The trust helps and supports the family member without affecting their government benefits, including SSI and Medicaid.

The trust should be written by an attorney experienced with Special Needs Trusts and the government benefits involved. By carefully drafting the trust, the assets in the trust will not affect the government benefits, and distributions from the trust will provide an extra benefit. Although some people have expressed concern that the benefits available from a Special Needs Trust are limited, they are not. In fact, the benefits can be substantial and improve an individual’s quality of life.

This illustration will help. If someone has a child with special needs, such as autism, ADHD, Down syndrome, or some other challenge, a parent or grandparent can establish a Special Needs Trust. After it is established, anyone can contribute assets, such as money, bank accounts, property, real estate, and cash. The assets in the trust will be used to support the individual with special needs. After the individual dies, the assets remaining in the trust can be distributed to someone else, such as siblings, nieces or nephews, or even a charitable organization whose mission is to support those with a similar special need.

The government benefits will be lost if a Special Needs Trust is not used and the property is given directly to the individual receiving government benefits. We do not want that result. Obviously, giving assets directly to them is a bad idea. Instead, the assets should be placed in a Special Needs Trust. Structured this way, the individual receiving government benefits will not lose those benefits, yet they will receive support from the trust. And at the individual’s death, the assets in the trust will pass to whomever or whatever the person creating the trust thought best, including family members or people with a similar special need.

When Should You Create a Special Needs Trust?

You should create a Special Needs Trust as soon as you discover that you have a special needs family member who you want to help now or sometime in the future. Compared to waiting until years later, creating a Special Needs Trust soon will provide you with more flexibility and a greater opportunity to get the most benefit out of the trust. But, even if you have delayed in creating it, the benefits to having a Special Needs Trust far outweigh any drawbacks. Call us or schedule an appointment to see how a Special Needs Trust might fit in your life.

Beneficiary designations are an important part of your estate plan. They direct where certain assets or benefits are to be paid at your death. Usually, beneficiary designations allow the asset to pass directly to your beneficiary without delay. This often results in savings of time and money to your beneficiaries.

Life Insurance and Retirement Accounts
The most common assets with beneficiary designations are our retirement accounts and life insurance policies. When we establish our retirement accounts, we are given beneficiary designation forms to complete. On the forms, we identify who we want to receive the assets at our death. In addition to the primary beneficiary, we can name contingent, or successor, beneficiaries. As our lives change, the beneficiary we initially chose may need changing as well. For instance, if we establish the account before we are married, we might name a sibling or a parent as the beneficiary. After we marry, we might prefer that our beneficiary be our spouse. Later, children might enter the picture. If we have children, naming them as contingent beneficiaries might seem like the right thing to do.

However, it is easy to forget our beneficiary designations when we are caught up in everyday life. Months and years may pass without giving any thought to what will happen to those accounts when we pass. Let this be your reminder. And, when you check them, check in with your financial advisor or insurance professional to make sure that you are on track with the goals you’ve set.

Banking and Investment Accounts
In addition to the life insurance and retirement accounts, your banking accounts and investment accounts may also have beneficiary designations assigned to them. This is accomplished through a pay-on-death (POD) designation. For example, when a person who owns a bank or investment account adds a POD designation, the POD beneficiary will receive the account upon the death of the owner. As with other automatic transfers that occur at death, this type of automatic transfer bypasses Probate and the Estate Administration process.

Annual Review of Beneficiary Designations
At least once a year, you should review your beneficiary designations and POD designations. You want to be certain that the beneficiaries you identified remain who you want to receive the asset. As our life changes and our families change, grow and mature, the designation that made sense in the past may not make sense today.

Additional Consideration: Asset Protection
Occasionally, the beneficiary designation should change for reasons other than changes in marriage and children. Perhaps, you want to protect your assets from the cost of nursing home care. Perhaps, you want to protect your assets from falling into the wrong hands, such as the hands of an in-law or a child’s ex-spouse. Perhaps you want your assets to benefit someone without jeopardizing their other benefits, such as SSI, Medicaid, or other government programs. In those instances, a Trust can take care of the beneficiary and protect the assets you are passing to them. Care should be taken to ensure that the beneficiary designation is completed correctly so that it achieves your goal.

Let us help you make sure the beneficiary designations are correct and make the most sense for your family and your goals. If your goals include protecting your assets from nursing home costs of a beneficiary, from in-laws or ex-spouses, and from creditors, special guidance is necessary.