Salt Lake City Estate Planning

"10 Things You Must Know Before You Retire"

 

"The 2010 Retirement Confidence Survey (conducted by the Employee Benefit Research Institute) indicates that 27% of Americans have less than $1,000 in savings for retirement, and that only 46% of workers have tried to calculate how much money they will need to have saved for retirement."

If you fear you have not done enough to plan for a comfortable retirement, you are in good company. According to the 2010 Retirement Confidence Survey, more than a quarter of all American say they have less than $1,000 in retirement savings, and less than half of us have even tried to calculate how much money we will need to have saved.  When it comes to retirement planning, it’s easy to become overwhelmed and freeze like a deer-in-the-headlights. Last week I read a down-to-earth article listing 10 Things You Must Know Before You Retire.  I think it’s a pretty fair guide to help anyone get started, with tips like Know Your Retirement Expenses (rule of thumb: 70 to 80% of your current income), Know Where Your Income Will Come From, and Know What Medicare Covers.

There are couple others, however, that many people overlook:

Know How You Will Care for Aging Parents. Too many forget that, as we age, our parents age as well. Their health needs can impact your lifestyle – both in terms of time and budget. You can learn more about elder care issues on our website.

Know What Happens with Your Estate.  Making plans for your estate is a part of responsible retirement planning.  There also are steps you should take now to ensure your wishes are carried out in the event of your own incapacity. Again, visit our website, www.hunterestategroup.com, to learn more about estate planning, and while you are there, be sure to subscribe to our free monthly newsletter at www.hunterestategroup.com to stay abreast of changes in the law that could affect your retirement and estate planning.

 

"Claiming a Parent as a Dependent"

 

"Can you claim your mother as a dependent for income tax purposes if she lives with you? The answer is, it depends."

Family members often wonder whether they can, or should, claim an elderly parent as a dependent for income tax purposes.  Craig Reeves, an elder law attorney and former President of the National Academy of Elder Law Attorneys (NAELA), recently addressed this question for the New York Times publication, “The New Old Age.”

Reeves listed a five-step test to determine whether a child can claim a parent as a dependent:

1.    The person you claim must be related to you.

2.    The person must be a citizen, a resident alien or national of the U.S., or a citizen of Canada or Mexico.

3.    The person cannot file a joint tax return with any other person.

4.    The person’s gross taxable income cannot exceed the IRS’s personal exemption (currently $3,650 for 2010).

5.    The child must provide more than half of the parent’s support during the calendar year.

If your situation passes this five-step test, you may be able to claim the deduction. However, become a careful record-keeper and make sure your parents’ creditors do not come to rely on you directly to pay her bills. Additionally, because every situation is slightly different, you are well-advised to seek qualified counsel in order to protect yourself, and your parents’ eligibility for various government benefits to which she may be entitled.

 

"For the Rich, ‘tis Better to Give Than Wait"

 

"We know the estate tax is coming back, so you want to move assets out," said Andrew Friedman, the former senior tax partner at Washington law firm Covington & Burling. "This is a good year to give away assets to children and grandchildren."

Earlier this week I wrote about a specific gifting strategy known as a Grantor Retained Annuity Trust (GRAT), explaining why now may be an excellent time to consider this type of planning to transfer wealth to future generations. I recently ran across an article on Reuters.com that further explains why now is an excellent time to consider many types of lifetime gifting as part of your wealth-transfer planning.

If you have been following my blog, you know that the estate tax has disappeared this year for the first time since Teddy Roosevelt was president. If Congress does not reach some agreement and take some action before the end of this year, the tax is slated to return next year. Now may be the best opportunity you will have to give away assets and pare down your estate through a comprehensive strategy of tax-free gifts, intra-family loans and trusts. Why? The estate tax is likely coming back, and with a vengeance, as early as next year. Interest rates, at historic lows, make certain wealth transfer techniques (such as GRATs and charitable lead trusts) even more attractive. Gift taxes, currently set at 35%, are set to bounce back up to 55% next year. And, capital gains taxes are expected to rise.

Some of the strategies you may want to consider implementing now include:

· Grantor Retained Annuity Trusts (GRATs)

· Charitable Lead Trusts

· Outright gifts, perhaps even in excess of the annual gift exclusion

· Intra-family loans (at rates as low as 0.53 percent)

If you would like to explore some of these options, time is of the essence. We are moving into fall, and unless Congress takes action otherwise, some of these windows of opportunity will close with the return of the federal estate tax on January 1, 2011.

"Estate Planning: The Great GRAT Debate"

Long-term GRATs remain viable and can be a powerful tool for effective wealth transfer planning, especially where interest rates are low and asset values are depressed but expected to rise.

A grantor retained annuity trust (GRAT), is an estate planning instrument used to transfer large (appreciating) assets to future generations. Properly structured, a GRAT can serve to both maximize the value of the gift and minimize (or eliminate) estate and gift taxes.

Here’s how it works, and why this planning strategy is so popular right now. The person establishing the trust (referred to as the grantor/donor) transfers property into a GRAT, the terms of which provide that the grantor will receive a fixed annuity each year, usually for a term of years. At the end of the term, the beneficiaries get whatever is left. Because the retained annuity is calculated to (theoretically) equal the value of the remainder, there is no gift tax at the time the trust is established.  For the GRAT to succeed, the underlying assets must grow, over the term of the trust, by at least the amount of the applicable discount rate specified in IRC §7520, commonly referred to as the 7520 rate. If assets in the trust outperform the 7520 rate, the excess value will pass to the heirs both gift and estate-tax free. Currently, that rate is set an historical low of 2.6%. Because of this extremely low rate, GRAT-planning strategies can be highly effective for transferring significant family wealth, while avoiding gift taxes.

It seems, however, that Congress is targeting certain types of GRAT-strategies, known as “short-term” or “rolling” GRATs. One “catch” to the GRAT strategy is that, to be successful, the donor must survive the term of the trust. Should the donor pass before the trust terminates, then the GRAT fails. For this reason, some wealth advisors have structured short-term (two-year) or “rolling” GRATs . According to Forbes.com, “a bill co-sponsored by 10 senators (relating to an extension of COBRA premium assistance) was introduced at the end of June containing provisions targeting GRATs, the most significant of which requires GRATs to have a minimum term of 10 years. So it appears that some form of this anti-GRAT legislation will eventually become law. Further, any such legislation would most likely be effective upon enactment, as provided in the prior bills.”

At this point, given the legislative environment, short-term or rolling GRAT strategies may not be advisable, though the longer-term GRAT strategies remain viable. For those who wish to make large transfer of appreciating assets to future generations, a long-term GRAT strategy may work very well to maximize the final value of the gift while also avoiding estate and gift taxes.

Know Your Rights as a Medicare Beneficiary

 "Medicare is medical insurance to which most Americans are entitled at age 65. However, many Medicare beneficiaries and their families do not fully understand Medicare, and all of the benefits to which they are entitled."

Home health care benefits are among some of the most important Medicare benefits offered to seniors, often making the difference between having to enter a nursing facility or being able to continue in one’s home … or between full recovery and relapse! Medicare actually offers a fairly generous benefit for home health care, but this is one benefit that many seniors (and their families) have to fight to get.

Medicare is required by law to cover home health services with no time limit on the amount of time the beneficiary is covered, as long as the eligibility requirements are met. Additionally, the beneficiary is entitled to 35 hours of service per week. Still, according to a recently published article, few beneficiaries receive the level of service that the law mandates, and many find that their services are cut off prematurely. I encourage my clients to become well-versed with their Medicare benefits, and offer a wealth of resources on my website, www.hunterestategroup.com,  for that purpose. Knowing your rights as a Medicare beneficiary and fighting to keep services that are clearly necessary can make all the difference in your recovery.

 

"The Red-Hot Debate Over Raising the Retirement Age"

 

"Of all the flash points in the debate over Social Security, few generate as much heat as raising the retirement age."

“Normal” retirement age today is 66, and scheduled to increase by two months a year starting in 2017 until it reaches 67 in 2022. But there is hot debate now about raising the bar even higher. In fact, some are suggesting that, in order to “save Social Security,” the retirement age should be raised to 73 (though most proposals suggest 68, 69 or 70).

You can read more about how raising the retirement age would impact the long-term stability of Social Security, as well as how it could impact your benefits online at CNN Money.

I think it’s important to keep an eye on the retirement-age debate for a number of reasons, including how an increased retirement age could affect your estate planning. If you own a family business, or are involved in any type of lifetime gifting, an increased retirement age could cause you to re-think your planning.

 

"The Art Of Collaboration"

"Collaboration is the effort of many to build a result in which the whole is greater than the sum of its parts. In the financial profession, there are many different ways to build a collaborative environment and create game-changing dynamics in the team effort."

 

As an estate planning attorney, we work closely with other professional advisors, including Certified Financial Planner™ practitioners, investment advisors, financial consultants, insurance professionals, Certified Public Accountants, and tax advisors. I believe the team approach provides clients with the most comprehensive, realistic and effective estate plan. So, I was pleased to read in this month’s issue of Financial Advisor magazine an article entitled, “The Art of Collaboration.” We have been using for year many of the collaboration strategies suggested in the article. Additionally, I think mutual respect and open communication are the cornerstones of any collaborative relationship. Toward that end, I work to keep my “team members” involved and informed. While we continue to employ traditional methods, such as newsletters and personal networking, we are increasingly using internet-based tools to enhance our efforts. This blog is one example, our website and newsletter, located at www.hunterestategroup.com, are another. You also can follow me on Twitter. While I don’t believe electronic communications supplant personal contacts, they certainly can augment them.

If you are a financial professional looking for a satisfying collaborative relationship, I encourage you to follow my blog, visit www.hunterestategroup.com , and give me a call. Perhaps we can work together to better serve clients for the best possible outcome.

"10 Retirement Planning Moves to Make Now"

 

"There is no one-size-fits-all solution for retirement planning. Most people have unique situations regarding their finances and living arrangements. But there are some steps everyone can take to improve their financial situation. These ten steps can help you get on track to a secure retirement."

Some people are discouraged about their retirement planning, confused about where (or if) to invest, and sticking their heads in the sand about their financial futures. But, regardless your current financial situation, retirement planning really begins with solid, common sense, financial planning and budgeting. US News & World Report recently listed 10 Retirement Planning Moves to Make Now, and each one of them makes a lot of sense – whether you are planning for retirement, or just a solid base of financial security.

Consider some of these smart moves: Get Out of Debt, Earn More than You Spend, Save for a Rainy Day, Create an Estate Plan, and etc.

As it turns out, we should all be planning for retirement with prudent financial moves today.

"How to Talk to Your Parents About the Estate Tax"

 

"Bringing up the estate tax with your aging parents can be as awkward as inquiring after their sex life—or worse, because it could imply that you are chiefly interested in your inheritance. But making sure that they understand the current complexities of the law will help their money end up where they want it."

Having “the talk,” is never easy. Whether you are 10 years old and your parents are having “the talk” with you … or you are 50 years old and having “the talk” with them … the topics, though vastly different, are never easy. But your parents were brave enough to sit down and explain the facts of life with you when it was needed. Now, it may be your turn to return the favor and talk about the facts of the estate tax.

Though the estate tax is currently on a one-year sabbatical, it looks increasingly like it will return next year – and with a vengeance, pouncing upon estate assets in excess of $1 million. Now would be a good time to talk to your parents about how the estate tax could affect them, when previously they may have assumed they were “safe.”

A recent article in US News & World Report offers some tips on how to bring up this sensitive topic, including making sure that your parents realize you do not have designs on their money. The article is a good read, but I’d like to add another tip. Refer your parents to this blog, to my website www.hunterestategroup.com, or to our monthly e-newsletter, subscribe on the website.  Talk about the issues you read, and how they affect your own lives, and the live of your loved ones – including your parents.

 

MEDICARE’S 45th ANNIVERSARY

Medicare

"As President, I will protect the promise of Medicare and Medicaid, and make sure they continue to be strong and solvent for our children and grandchildren.  As we celebrate the 45th anniversary of these critical programs, we reflect on a moment when our Nation made an enduring commitment to care for those who have given the most to our society, and those living in poverty.  Let us continue protecting Medicare and Medicaid so older Americans can age with dignity, and so all Americans can live longer, healthier, and happier lives."

Happy Birthday Medicare! Lyndon Johnson signed Medicare and Medicaid into law on July 30, 1965, which means we are now celebrating Medicare’s 45^th anniversary. President Obama issued a Presidential Proclamation stating, in part:

When President Lyndon B. Johnson signed Medicare and Medicaid into law on July 30, 1965, millions of Americans and about half our Nation's seniors lacked health care coverage, unable to afford basic health care services or weather a medical emergency.  The signing of Medicare forged a promise with older Americans -- that those who have contributed a lifetime to our national life and economy can enjoy their golden years with peace of mind and the security of reliable medical insurance … As President, I will protect the promise of Medicare and Medicaid, and make sure they continue to be strong and solvent for our children and grandchildren.  As we celebrate the 45th anniversary of these critical programs, we reflect on a moment when our Nation made an enduring commitment to care for those who have given the most to our society, and those living in poverty.  Let us continue protecting Medicare and Medicaid so older Americans can age with dignity, and so all Americans can live longer, healthier, and happier lives.

You can watch President Johnson’s signing of the bill in a YouTube video released by the Democratic Party (you may not agree with the political message, but I found the historical footage interesting!).