Retirement Estate & Planning guide

8/12/2019 Retirement Estate & Planning guide

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RETIREMENT & ESTATE PLANNING 2014 PAGE 2


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Dr. Harold Wong


What women should know about moneyBaby boomers, those 80 million

born in the U.S. from 1946 to 1964,had a different experience than

the Silent or Greatest Generation.

In most households with a boomer

couple, both worked for most of

their adult lifetime until retirement.

Remarriages are not uncommon,

and people are living longer.

Some observations that applyto boomer women:

nYou should not depend on a marriage certificate for your desiredlifestyle. Only about half of marriages last forever. For boomers,

its not unusual to have two or three marriages. Each time theres

a divorce, both spouses decrease their living standard. Although

an even split of community property is the norm, the legal feesand emotional damage can become permanent. Now the two

ex-spouses have to pay for two households, two big-screen TVs

and two sets of furniture when they split up. When one takes a

vacation, the hotel room costs the same, whether there are one or

two occupants.

Women should plan to be able to live on their income only. The

divorce courts have changed their opinions about spousal support.

Unlike 40 or 50 years ago, the courts expect the woman to work.

n Women must understand Spousal Continuation. An older

couple recently came into my office. He has been a retired federal

government employee for the past 30 years. He has a federal

pension of $35,000 a year. Each spouse only had $5,000 of Social

Security income. She never made much in her working life. His

Social Security retirement benefit was severely decreased because

he had a federal pension. Their total steady income, not counting

investment income, was $45,000 and they spent $35,000 annually.

However, upon his death, his wife will only receive $4,000 a year

from his pension, and there will only be one Social Security check.

The family steady income will drop from $45,000 as a couple to

$9,000 for her.

nFinancial and tax knowledge, not diamonds, are a girls best

friend. Because women tend to outlive men by four to six years,

at some time in your life, you will be responsible for managingassets that may have taken a lifetime to build. It may be financial

investments, a small business, the family farm or an inheritance.

Its an awesome responsibility, and 77 percent of women say they

need help, according to a 2008 study.

Contact tax adviser and financial educator Dr. Harold Wong at 480-

706-0177, [email protected] or www.drharoldwong.com.

Athlon Media Group


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DIGITAL ESTATE PLANNINGRecord and share all your online information with a loved one

MORGUEFILE.C

OM

ONLINE ASSESTS

Do you have a Facebook account? Pay your bills, do your banking

or share photos online? Ever think about what will happen to those

accounts when youre no longer around?

Americans own a vast amount of digital assets but do little in the way

of digital estate planning. According to a 2011 survey conducted

for McAfee, a security technology company, Americans value their

digital assets at more than $54,000 on average. These financial

accounts are part of an individuals estate, said Paul Golding, co-

founder of Cirrus Legacy, a digital legacy services company based

in the United Kingdom.

What are digital assets?

Digital assets are any files that a person owns and can be placed

into four main categories:

nFinancial, such as PayPal, online banking, gaming,

gambling and lottery sites.

nSocial, such as Twitter, Facebook, MySpace, Google Plus,

LinkedIn and email.

nSentimental, such as Flickr, Picassa, Instagram, YouTube,

Photobucket and diary sites.

nIntellectual, which includes developed code, software licenses,

websites, blog content, Google Docs and URLs.

Good estate planning includes the fate of these intangible goods

because they often have a lot of emotional or monetary value, said

John Romano, co-writer of The Digital Beyond blog. So while you

cant put a price on childhood photos, you can put a price on a

domain name of a lucrative online store.

There are plenty of reasons to be concerned about digital estate

planning. If your heirs dont know your passwords or what your

digital assets are, theyll be faced with confusion and red tape.

For example, online businesses can cease to function if domains

expire and hosting companies are not paid, Golding said. Actual

funds that are stored online can be lost if there is no knowledge

that the account exists and if no records are kept that are accessible.

Additionally, subscriptions to online content will continue to be

paid. Utility bills will need to be cancelled.

The main issue is in the past, everything was delivered to the door

by the postman. Important information was kept in a box or filing

cabinet and was easily accessible by individuals dealing with an

estate. Now all of the accounts are held online and not recorded in

one place generally, if at all. Who knows you have the accounts and

what information do they need to access the funds/data? Golding

said.

What to consider

The first thing people should consider in regard to digital estate

planning is access, Romano said.Access to devices and online accounts is imperative if the digital

assets have any value. Email, and increasingly Facebook, Google

and Twitter, are used as keys to access many other accounts. Access

to these accounts would let a loved one reset passwords to other

online accounts. But without access, the people who follow are

likely to encounter significant roadblocks, he said.

Continued on Page 6...

By MElissa ERickson | MoRE contEnt noW


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Continued from Page 5...

The next step is putting the pertinent information in a form

that your heirs can access.

Collating all of the information in one place is a good move,

as it makes it simpler for their heirs, Golding said.

Romano said, An inventory is the best place to start. It should

be a list of your email accounts, important online accounts

and passwords to your devices. For each entry, provide a

username/email and the password. You can optionally add

in your wishes (should an account be deleted, archived or

shared). Its handy to have if you forget your info, and its

critical to your executor.

An inventory can be a simple piece of paper or spreadsheet.

Whatever works. Ten minutes of work now could save a

loved one days of aggravation in the event of your death

or incapacitation.

A spreadsheet has drawbacks though, Golding said. A

spreadsheet is not accessible when you are out and aboutand need account information. Personal computers are

liable to crash, and most people do not back up regularly,

he said.

Paying a provider for this service allows unlimited access

from any device, anywhere, he said.

One last bit of advice from Romano: Dont add your inventory

to your legal will, as wills often become public documents.


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About living, not dying

Its not just about the money. Its also about ourselves, our bodies, and

what would happen in a health care crisis. Its also about your family,

your children and what would happen to them.

Avi Kestenbaum, partner with Meltzer, Lippe, Goldstein & Breitstone, Mineola, NY

Where to start with an estate plan


Young or old, rich or poor, estate planning is essential to protect

your family in the event of sickness, accidents or death.

Every single adult needs to have an estate plan, said Avi

Kestenbaum, partner with Meltzer, Lippe, Goldstein & Breitstone

in Mineola, NY. Estate planning is about living, not dying. Once

you have a estate plan in place you should feel very good about

taking care of your assets and your loved ones, he said.

According to the National Association of Estate Planners and

Councils, more than 120 million Americans do not have up-to-date

estate plans. Without a plan your estate might end up in probatecourt. Your family may be hit with excessive taxes. Your family may

waste time and money settling your affairs. Estate plans protect

your beneficiaries and as well as your assets.

Its not just about the money, said Kestenbaum, who is co-

chairman of his firms trusts and estates department and an

adjunct tax professor at Hofstra University School of Law. Its also

about ourselves, our bodies, and what would happen in a health

care crisis. Its also about your family, your children and what would

happen to them.

What is your estate?

No matter how large or how modest, everyone has an estate,

which includes all your possessions like car and home plus your

investments and savings. The definition of estate planning is

broad, but really its about the fulfillment of wishes for ourselves

and our loved ones. What do you want to happen to your money

and your loved ones after you die? Kestenbaum said.

You cant take it with you, so I cant stress enough how important

it is to think about retirement all during the years you are working,

said Derek Gregoire, senior partner with SHP Financial in Plymouth,Mass. Every adult needs to have a few basic documents, and in

order to put these documents in order youll need to make some

important decisions.

How to start

While estate planning is complicated and often requires the help

of a professional, getting started in the process is easier with a few

insider tips.



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The first step in creating an estate plan is determining your assets

and liabilities. Make a list of your possessions and their value.

Compile recent statements from bank and brokerage accounts

and insurance policies. Lastly, list all liabilities such as mortgages,

lines of credit and debts.

The next step is identifying how your assets will be distributed,

Kestenbaum said. If your spouse and children are the beneficiaries,

what proportion of assets will they each receive?

Youll also need to designate successor beneficiaries in case an

heir is not living at the time of your death.

What are your goals in regard to yourself and your family? Who do

you want to care for minor children? Who should make decisions

for you if youre unable? Maybe youre sick or incapacitated, or

maybe youre unreachable because youre climbing Mt. Everest,

Kestenbaum said.

Online programs are available to help a person draft documents

such as power of attorney or health care proxy, but you need

to hire a professional to help, Kestenbaum said. I dont believetheres a computer program out there that can do the job for you.

Its not just about filling out forms, and laws vary by state. Hiring

an attorney will lead to much less aggravation in the future.

Once an estate plan is established, dont forget to re-evaluate it

about once a year or any time life events occur such as getting

married, having a child, starting a business or accumulating

substantial assets, Kestenbaum said.


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Advice on estate planningIf you have children its even more important to plan for the future.

Estate planning will determine their financial future as well as

day-to-day care rather than leaving it up to the courts.


Estate planning isnt easy, but it also doesnt have to be incredibly

complicated. Put simply, estate planning is determining how you

want your assets to be distributed after you die. Because of myriad

rules and regulations, its best to consult a professional who can

guide you through the process of drawing up an estate plan.

Here are a few common retirement-related questions and expert

answers:

What changes did the American Taxpayer Relief Act of

2012, signed by President Obama in early 2013, bring

about in regard to the federal estate tax exemption?

The big thing people should know is that the federal income taxexemption is tied to inflation, said William E. Hart, a partner with

the law firm of Bulkley Richardson in Springfield, Mass.

In addition, the gift tax and the estate tax share the same exemption,

which is $5,250,000 for 2013.

Lastly, portability is now a permanent feature of the gift and the

estate tax. If one spouse passes away and his or her federal estate

tax return is complete and signed, the unused exemption is passed

along to the surviving spouse, Hart said.

A surviving spouse can use the dollar amount of the deceased

spouses unused exemption in addition to his or her own

exemption, the latter increasing with inflation adjustments, to

offset taxable gifts made during life and his or her taxable estate

at death, he said.

Whats the difference between a trust and a will?

A will is a legal document that specifically states who will receive

your assets after your death as well as naming guardians for any

dependent children. Wills are derived from old English laws and

contain certain formalities that must be observed, said Roger

Buffington, managing attorney with Buffington Law Firm ofFountain Valley, Calif.

Wills must be observed by two people in addition to the signatory,

and in some states wills do not become valid until they have gone

through probate, which can be an expensive and drawn-out

process.

A trust is similar to a will and has some formalities, too, Buffington

said: The huge difference is that a trust does not require probate



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to become valid. Another difference is that a trust goes into

effect as soon as its signed and can govern during the life of the

person who wrote it. A will goes into effect only after death.

What are some of the excuses people use to put off

estate planning (and why they dont make sense)?n Estate planning is just for the wealthy. Not true, said

Buffington. An estate is comprised of everything you own. You

home, car, possessions and checking and savings accounts. No

matter how small or large, your assets will need to be managed

after your death or should you become incapacitated. Its your

responsibility to make sure your finances are properly taken care

of.

n Im too young. You never know when or how early youll

need estate planning, and if you leave it for later, it might be

too late. If you have children its even more important to plan

for the future. Estate planning will determine their financial

future and well as day-to-day care rather than leaving it up to

the courts.

n I need a lawyer to draft the documents. If your financialsituation is relatively simple, its possible to draft legal documents

like a basic will, power of attorney and health care directives for

free or at low cost. Check out doyourownwill.com, legalzoom.

com or nolo.com. For health care decisions, check out http://

www.agingwithdignity.org/five-wishes.php.p.

Facts about estate planning

wills and last wishes...

If you die without a will, your states

laws of descent and distributionwill

determine who receives your property.

These laws vary by state, but typically

your spouse and children are the

default beneficiaries,

or if none, other family members.

The person in whose name the willis written is legally referred to as

the testator

The shortest-known willsare only three words long, reading,

all to sonandall to wife.


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The troublewith moneyEducate children on

inheritance so theyll

make good choices with it


Youve worked hard all your life to provide for your kids when

youre gone. When that day arrives, will your children use your

inheritance wisely?

Maybe or maybe not, but people are concerned enough about the

issue to take action.

A recent survey by WealthCounsel, an organization of estate

planning professionals, found that 35 percent of people are

drawing up their estate plans to avoid financial mismanagement

by their heirs.

Luckily, there are many things for people to do to prepare their

children to inherit wisely and it starts with simply bringing up

the subject.

A lot of clients are reluctant to share their financial situation and

inheritance with the children, and that is not a good idea, said Ken

Moraif, senior adviser at Money Matters, which is based in Dallas.

Too many times I see kids inherit money they were not expecting

and they treat it like found money, like winning the lottery. If

theyre not prepared, they blow it, said Moraif, who also hosts the

Money Matters radio show.Its incumbent upon parents to educate their children about whats

coming, especially if an adult beneficiary is not used to having that

kind of money.

Lets give the example of a hard-working adult who makes $30,000

a year. If he comes into an inheritance of $500,000, he might not be

able to handle it, Moraif explained.

Starting the conversation

Because its an awkward conversation, generally people do a poor

job of preparing the kids for inheritance, agreed Lea Ann Knight,

certified financial planner with Garrison/Knight Financial Planning,

Bedford, Mass.

When do you start the conversation? When youre in your 80s? In

your 50s?, Knight asked. My advice is when kids are getting older,

at college age certainly, they should be told, There is some money

coming. You dont have to supply all the specifics, but if you want

them to be mindful of the money, you should talk to them about

it, Knight said.

Part of inheritance is paving the way for it to advance what you

want the money to do, Moraif said. You have to educate your

children and pass along your values and opinions about the money

and investments.

Having a family meeting is one way, he said. Another is to make a

video mission statement that documents your personal values,

ideas and opinions about the money youve earned and saved,

Moraif said.

The conversation needs to be ongoing, too.

Usually, it takes multiple conversations before it sinks in, Knightsaid.

Other ways to bequeath

Its especially important when it comes to dividing between

beneficiaries, Moraif said. You need to sit down and explain, This

is what Im doing, he said.

Say a person has two children, Moraif said. One is successful and

makes more money. The other works hard but is just making ends



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meet. A parent may want to give some money to the child who

needs it more, but the successful child may feel penalized for doing

well.

Kids see money as love units, Moraif said, so if youre giving more

to one child and less to another, that needs to be explained.Attaching some strings to inheritance, such as requiring a child to

earn a degree or pass drug tests before receiving the money, is a

good idea if youre worried about a child not making good choices

with the money, but can cause resentment, Knight said. I think

restrictions are a mistake in most cases, she added.

Some experts consider passing down some of the inheritance

while youre still alive to be able to guide your children in money

matters, but Moraif doesnt like that idea.

Its like a trap, a negative thing or a test. I think its better to teach

them your values instead, he said.

For young adult children, Moraif advises doling out the inheritance

in thirds: at age 20, 30 and 40 or age 30, 40 and 50, for example.The first third, theyre going to blow right through it. The second

third, theyll probably go through it more slowly. By the last third,

theyll know this is it, Moraif said.

Talking about an inheritance is an important topic most people

leave until too late, Knight said. Its something you should be

talking about all along so you can be confident theyll spend it

wisely when youre gone.

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Another fact about

estate planning

wills and last wishes...

When actor James Gandolfinidied in 2013, he left the bulk of his

$70 millionestate to his son, with the rest going to hisinfant daughter, wife and other relatives.


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The key to building a successful retirement lies with creating a

spending plan that will support yourself after you stop working,

said Derek Gregoire, senior partner with SHP Financial in Plymouth,

Mass.

The key is to think about retirement while youre earning money.

We call working the accumulation years and retirement is the

distribution years. You need to work with an expert and plan

ahead. If you put it off and dont create enough assets to get by,

there will come a day when its too late, Gregoire said.

Unfortunately, many people dont plan ahead, said Chris Hogan,

financial adviser for the Dave Ramsey organization.

People fear the unknown, and a lot of people dont know where

to start preparing for retirement. Feeling overwhelmed, they

simply choose to not engage with the process. The truth is that

by following some clear steps and seeking wise counsel from aprofessional with the heart of a teacher, planning for retirement

can be easier than you think, Hogan said.

How to plan

Setting a budget or a spending plan is imperative.

A budget is the road map to financial success, regardless of how

much income you earn. Having a budget allows you to tell your


Retirement not an age, its a dollar figure, experts say

Experts throw out percentages all the time, and people dont understand them,

but they understand dollars. When I work with people, I have them live with numbers,

not percentages. When you know what it takes to run your household

month-to-month, you are ahead of most.Chris Hogan, a Dave Ramsey financial adviser

Whats your number?



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money where to go instead of wondering where it went. Your

income is your most powerful wealth-building tool. It must be

managed and controlled to see the tangible benefits, Hogan

said.Because pensions have gone the way of the dinosaurs, retirees

need to create their own pensions to provide a predictable

income with inflation for the rest of their lives, Gregoire said.

The monthly income for retirement comes from investment

accounts such as IRAs and 401(k)s that were funded throughout

your career, Hogan said.

The trick is figuring out how much money youll need.

The best way to identify how much someone will need for

retirement is to think about the future retirement lifestyle.

What will be your income? What will be your debt load? If you

have worked a plan to get debt-free, the amount of money you

need to run your household will be significantly cheaper than

someone with debt, Hogan said.

While some experts advise that retirement will require a certain

percentage of your previous working income, Hogan disagrees:

Experts throw out percentages all the time, and people dont

understand them, but they understand dollars. When I work

with people, I have them live with numbers, not percentages.

When you know what it takes to run your household month-to-

month, you are ahead of most.

Look at how much money you have set aside for retirement,

and how much more you plan to contribute in a set period of

time. Now you have a clear picture of where you are in terms

of retirement.

Retirement is not an age, it is a financial number. Sit down

with an investment professional who can help you get a clear

picture of where you are versus where you want to be in terms

of retirement. It is never too late to start and never too late to

try harder.

More tips

Here are a few more tips from Hogan for creating a retirement

spending plan:

nBudgeting is a process, so dont get frustrated. It will take a

couple of months to work out the kinks.

nBe aware of the areas that bust your budget eating out,

groceries and unplanned spending are the most dangerous.

n If youre married, get on the same page with your spouse

about a money plan. Being united about the desired destination

can help couples support each other.

nBe honest about expenses that can be cut back. Identifyingthese areas can help save you hundreds of dollars each

month. For example, eliminating the mega cable package or

eliminating the landline phone are two areas that help save

people money.

nUse cash. Spending cash helps people begin to understand

and control money. Set a spending limit, and enforce it by

using cash.


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More than moneyHave a plan in writing for heirlooms and keepsakes

Family members will argue over all sorts of items: furniture, artwork, baseball card and coin

collections, jewelry, silverware, knickknacks even a hair brush.Lori Bolander, Bolander Law Group, El Cajon, CA


Say estate planning and peoples first thoughts tend to focus on

the family home, retirement funds and other investments. This is

smart but, it turns out, estate planning is not just about money.

Eighty-six percent of baby boomers who were surveyed in 2012 by

the Allianz Life Insurance Co. said that preserving family keepsakes

was just as important as providing for their families financially.

Seventy-four percent of those 72 and older said the same thing,

and the results confirmed data from a similar survey conducted by

Allianz in 2005.

In a down economy, theres always a focus on keepsakes and

family heirlooms, said Samuel Fineman, managing member of law

firm Cohen Fineman of Marlton, N.J. Property values fluctuate, but

precious metals like gold are appreciable. More than that, today its

about value and what people value.

Avoid conflict

Not all family members get along. Ive seen bigger fights over

keepsakes than money, said Lori Bolander of the Bolander Law

Group of El Cajon, Calif. A mantel clock was the subject of a major

dispute.

Family members will argue over all sorts of items: furniture, artwork,baseball card and coin collections, jewelry, silverware, knickknacks

even a hair brush, Bolander said.

Generally, courts dont like to get involved in disputes over

personal property, Bolander said. But probate can be held up

because of disputes over keepsakes, Fineman said.

Planning ahead is the best option to avoid confusion and conflict,

Fineman said: In the long run it saves a lot of time, and really, the

last thing you want is your heirs fighting. Its easier to resolve

disputes before you die, he said.

How to plan

To get started, take an inventory of your belongings and include

everything you consider valuable. Make a list, Fineman said.

Make sure your list is detailed. Grandmas wedding ring can be

ambiguous, Fineman said. Which ring do you mean exactly? Havea detailed memorandum, he said.

Because some items, such as the simple bowl that was used in

great-grandmas christening or that special teacup, may hold a

great deal of sentimental value for one son or daughter, but not

another, its important have a conversation with your heirs.

It may be awkward, but try and make it as pleasant as possible,

Fineman said.

Have an informal meeting and discuss what you have. If you have

certain things that you want to go to certain people, make them

aware of it, Bolander said.

Some people even like to label things to avoid confusion,

Fineman added.

Each state has its own statutes in regard to the handing down ofpersonal property. For instance, in some states including California,

if you hand-write a list of who gets what, sign and date it, that is

a holographic codicil and will stand up in court, Bolander said.

This is a better option than adding the information into your will

because you can change your mind without having to go back to

your lawyer and update your will.

Finally, making your heirs aware you have a plan for your keepsakes

will ensure that the distribution of heirlooms goes smoothly.


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Documents

Retirement Estate & Planning guide