Estate Planning Blog Articles

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What Changes Will Allow Military Families to Put More Food on the Table?

Defense officials plan to modify the eligibility rules for the Basic Needs Allowance, increasing the income eligibility cap to 150% of federal poverty guidelines, Secretary of Defense Lloyd Austin said during a Senate Armed Services Committee hearing.

Military Times’ recent article, “More troops will soon be eligible for Basic Needs Allowance,” says that’s six months before the DoD is required by law to make the change. The higher income cap “will allow us to help more families,” Austin said.

Mandated in the 2022 National Defense Authorization Act, the allowance is a safety net for military families to help combat food insecurity. The law went into effect in January and currently applies to troops whose total family income is less than 130% of federal poverty guidelines. In addition to total family income, this is based on household size and location.

In the 2023 National Defense Authorization Act, Congress added a provision raising the income eligibility cap for the allowance to 150% of federal poverty guidelines. This lets more families qualify. The DoD is required to implement the new provision by 2024. However, the law allows them to do it earlier.

Based on Defense Department estimates, the higher income cap would increase the number of active duty families eligible for the allowance to about 2,400. However, a sticking point is that the Basic Allowance for Housing is counted as income by DoD when calculating eligibility. Senator Kirsten Gillibrand of New York asked Austin whether he would consider removing BAH from the calculation for the Basic Needs Allowance.

“We will do whatever’s feasible or what we’re allowed to do by law,” Austin replied.

“DoD’s own surveys show that 24% of our service members experience food insecurity,” Gillibrand said. “Last year, I met with military families on Staten Island who spoke about the challenges they face in basically putting food on the table to feed their kids.

“However, very few service members are considered eligible for Basic Needs Allowance … since [the housing allowance] is included in family income calculations.”

In addition, two congressmen have proposed legislation that would make the Basic Needs Allowance tax-exempt.

“Taxing support meant to help the most vulnerable undermines the purpose,” said Rep. Steve Womack, R-Arkansas, who introduced the proposal on March 22 with Rep. Dan Kildee, D-Michigan. “BNA should be treated like other military benefits outside of earned income, which is exactly what this bill prescribes.”

Military members “deserve to receive the full value of their military benefits,” said Kildee. “The Basic Needs Allowance, which helps support thousands of service members and their families, is not income and should not be subject to income taxes.”

Reference: Military Times (April 3, 2023) “More troops will soon be eligible for Basic Needs Allowance”

How Are Retirees Spending Their Nest Eggs?

The Investment Company Institute recently surveyed more than 9,000 adults to learn more about the characteristics and activities of those with IRA accounts, says Money Talks News’ recent article entitled, “3 Ways Retirees Are Spending Their IRA Savings.”

As part of the survey, ICI looked at what retiree households —those in which the head of household or spouse has retired from their lifetime occupation — do with the money they take out of their traditional IRAs.

Here’s what they said:

  1. Reinvest or save it in another account. Almost half (44%) of retiree households used a traditional IRA withdrawal. It can be tough to stop when you have spent year after year scrimping and saving for retirement. Maybe that’s why so many people withdraw funds from their IRA and put the cash right back to work.
  2. Pay for living expenses. Thirty-seven percent of retiree households said that they used a traditional IRA withdrawal for this purpose. The whole point of building a nest egg is to make sure you have enough money to pay the bills in retirement, and for many of the survey respondents, paying for living expenses is the primary reason they tap their IRA.
  3. Buy, repair, or remodel a home. About 15% of retiree households said that they used a traditional IRA withdrawal for this purpose. In addition, retirees often tap an IRA to spruce up their homes. While this might sound surprising, it shouldn’t be because housing is the No. 1 expense most people face during their golden years.

Here are some other common reasons why retirees use their IRAs, according to the survey:

  • Some other purpose: 12%
  • Spent it on a car, boat, or big-ticket item other than a home: 6%
  • Used it for an emergency: 5%
  • Spent it on a health care expense: 4%
  • Paid for education: 1%

Reference: Money Talks News (February 25, 2023) “3 Ways Retirees Are Spending Their IRA Savings”

Who is Legally Able to Amend a Trust?

Procrastination is the most common mistake in estate planning when people don’t create a will and trusts and when documents are not updated. For one family, a revocable trust created when both parents are living presents some complex problems now, when the surviving wife wants to make changes but is suffering from serious health issues.

As described in the article “Estate Planning: Who can amend the trust” from NWI Times, this scenario requires a careful review of the trust document, which should contain instructions about how it can be amended and who has the authority to do so. An estate planning attorney must review the trust to ensure it can be amended.

If the trust allows the surviving settlor to amend the trust, the authority to amend it may only be given to the surviving settlor. The mother may be permitted to amend the trust. However, it can’t be anyone acting on her behalf.

If the language in the trust makes the power to amend personal, a guardian or an attorney-in-fact likely won’t be able to amend the trust. Likewise, if the mother is incapacitated and cannot do this herself, the trust may not be amendable while she is ill or disabled.

However, if the trust allows the surviving settlor to amend the trust and the power is not personal, a legal representative, such as a guardian or an attorney-in-fact, may be able to amend the trust for her, if they have the authority to do so under the terms of the trust.

Anyone contemplating this amendment must be aware of any “self-dealing” issues. The legal representative will be restricted to making changes only for the benefit of the beneficiaries and should be mindful before attempting to amend the trust.

Suppose the authority to amend doesn’t exist or other restrictions make it impossible, depending on the state’s laws. In that case, it may be possible to docket the trust with the court and obtain a court order authorizing the trustee to depart from the terms of the trust or even amend the document.

Accomplishing this is far easier if all involved agree with the changes to be made. Unfortunately, if any interested parties object, it may lead to litigation.

Depending upon the desired change, entering into a family settlement agreement may be possible after the mother dies. If everyone is willing to sign off, an agreement can be written authorizing the trustee to deviate from the terms of the trust. This will also require the guidance of an estate planning attorney to ensure that the agreement follows the state’s laws.

If family members disagree with the change, the trustee can refuse to accept the settlement agreement to protect themselves from potential liability.

Reference: NWI Times (May 7, 2023) “Estate Planning: Who can amend the trust”

What Are Estate Taxes?

As the baby boom generation members age, they will eventually pass on their wealth to the next generation. When this occurs, millennials must be prepared to pay taxes on their inheritances, says a recent article, “Millennials May Inherit $68 Trillion: Here’s What to Know About Estate and Inheritance Taxes,” from The Motley Fool.

Estate taxes are imposed on the transfer of assets after someone dies. Not every estate in the U.S. is subject to federal estate tax. Only estates valued above a certain threshold are subject to taxes. This is currently $12.92 million for singles and $25.84 for married couples. No federal estate tax is due if the estate is below this amount.

Estate taxes are paid by the decedent’s estate, not the person who inherits the wealth. When a person dies, their executor is responsible for completing the estate tax return and paying any taxes owed. The estate of the decedent person will only pay taxes on the amount over this threshold.

Estate taxes are levied on all assets a person owns at their death, including real estate, stocks, bonds, jewelry, cash and other valuables. The percentage of estate tax charged ranges from 18% to 40% of the estate’s total value. For example, an estate is valued at $15.5 million in 2023, and the expenses incurred before death—medical, funeral costs, etc., cost $500,000. You’d subtract this amount from the estate’s total value ($15.5 million—$500,000—$12.92 million threshold). Since the taxable amount is over $1 million, it will be subject to a 40% tax rate—making the taxes owed $832,000. The after-tax for heirs would be $14,168,000.

In addition, some states levy their own estate taxes. Twelve states have an estate tax: Connecticut, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, Washington and the District of Columbia. Five states have only an inheritance tax—Iowa, Kentucky, Nebraska, New Jersey, Pennsylvania, and Maryland have a state estate tax plus an inheritance tax.

Can you protect your heirs from estate taxes? In a word, yes!

There are many ways to avoid federal and state estate taxes. One is to gift money and assets to loved ones while living, taking advantage of the annual gift tax exclusion, which lets you give up to $17,000 per person without incurring any taxes.

Another is to place assets in a trust. Your estate planning attorney will advise you on what kind of trust works best for your situation. For example, charitable trusts donate portions of your estate to a charity while taking the assets out of your taxable estate.

Once the Tax Cuts and Jobs Act of 2017 expires, the federal estate tax exemption will return to the $5.49 million exemption, around $6.2 million when adjusted for inflation. Therefore, it is essential for anyone whose estate may exceed this considerably lower threshold to plan now to avoid having to pay estate taxes after December 31, 2025.

Reference: The Motley Fool (May 2, 2023) “Millennials May Inherit $68 Trillion: Here’s What to Know About Estate and Inheritance Taxes”

Will I Be Able to Afford Nursing Home Care?

About 60% of older adults — or 24 million households — wouldn’t have the resources to pay for in-home long-term care, despite the fact that they would prefer to “age in place,” per a National Council on Aging report.

Fox News’ recent article entitled, “Most seniors in America can’t afford nursing homes or assisted living, study finds,” says that the researchers looked at 2018 data from the Health and Retirement Study, which was a joint effort by the National Institute on Aging and the Social Security Administration that surveyed some 20,000 U.S. adults about their net wealth.

When the researchers started examining the data some years ago, they were initially surprised to see that so many older adults were at severe risk of financial insecurity, Dr. Jane Tavares, a lead researcher at the LTSS Center at UMass Boston, told Fox News Digital.

“There is a common misconception that older adults are asset-rich, but we have found in our research that this is not generally true,” she said.

Dr. Tavares also noted, “We expect that there will probably be some worsening, once we examine data for the period covering the COVID pandemic.”

The national average cost for assisted living is $4,500 per month. However, it can vary significantly depending on the location and level of care needed.

“As the population continues to age and demand for these services grows, it is likely that the cost will continue to rise,” said Dr. Steven Norris, a senior health and care expert who is also the medical director at Transitions Care in Chicago, Illinois.

The widespread shortage of qualified caretakers means facilities must pay more to secure the right people.

“For decades, there has been a lack of awareness of how expensive assisted living really is.” “Additionally, recent increases in minimum wage requirements and changes in overtime payment legislation are increasing assisted living costs,” he said.

The cost could range from $3,000 in rural areas to $7,000 to $9,000 in urban locations.

“For decades, there has been a lack of awareness of how expensive assisted living really is,” Kim told Fox News Digital.

“Some people thought health insurance would cover long-term care costs, while other people optimistically believed that they would live a healthy life forever.”

Assisted living companies had to raise prices to keep up with their costs continually. However, retirees did not see the same growth in savings or investments. Middle-aged and older adults are also now facing a very different financial landscape than the generations before them did. More than the increases in household income and assets have also been needed to keep up with rising living costs, health care and inflation. Even when older adults have assets, they are often tied up in property and need to be more readily available to help them cover costs.

The changing retirement model has also added to gaps in savings. Past generations had private, employer-sponsored pensions that provided predictable payments. Many Americans now rely on 401(K) accounts, leaving individuals responsible for saving enough money to cover their retirement years.

“With all of this combined, few older adults have any significant savings in retirement accounts — and most can’t afford long-term care insurance that would help cover the expensive costs of assisted living or nursing home care,” she explained.

“With private long-term care insurance being unaffordable for most older adults, it is key to begin considering combined public and private initiatives that can put the cost of coverage within reach and make it more appealing to consumers,” she said.

Reference: Fox News (April 26, 2023) “Most seniors in America can’t afford nursing homes or assisted living, study finds”

How Do I Talk to My Parents About Estate Planning?

The best time to have this conversation is today. If you’re unsure how to broach the subject, you might ask a trusted family friend to help you navigate the conversation with compassion.

JP Morgan’s recent article, “How to talk to loved ones about estate planning,” says that if your loved ones have already started this process, ask which documents they have and see if any need to be updated. You may need to consult an experienced estate planning attorney to see what’s required.

Discussing estate planning with aging parents can be challenging, since both sides may hesitate to broach tricky topics involving end-of-life care and related decisions. However, the probate process becomes much more difficult if your parent dies without an estate plan.

Delaying this conversation won’t make it any easier. It’s important to stay calm and address the topics gently and openly. You may have to initiate a conversation several times before your mom or dad is willing to open up—another reason to broach the topic sooner.

If you’re having difficulty getting through to them, you could bring in another family member or a trusted family friend who can help you approach this conversation with the needed compassion. You may also consult an estate planning attorney to help plan and frame the conversation itself.

If your parents haven’t started planning their estate yet, think about some of the critical matters you want to discuss, like health issues, medical insurance, help with making decisions in case of incapacity, help to pay bills and keeping finances in order.

You should also ask about a plan if they need help managing daily tasks like walking, dressing, preparing meals and bathing.

Decision-making can also become a challenge for some as they get older. Therefore, having a valid power of attorney, living will and health care proxy is critical.

As tough as this can be, you must ask these questions when helping your parents plan their estate and future.

Reference: JP Morgan (April 26, 2023) “How to talk to loved ones about estate planning”

How Can I Prevent a Fall?

Less than 60% have considered the home modifications necessary to age in place safely, says Yahoo Finance’s recent article entitled, “Prevent 300,000 Fall-Related Hospitalizations with Simple Aging in Place Home Modifications According to Lisa M. Cini.”

America’s leading aging expert compiled a list of simple home modifications to prevent falling and maintain balance while they stay home. Consider these simple home modifications to prevent falls:

  • Keep Item Within Reach. This includes your telephone and anything on a high shelf, or on another floor you may need. That way, you won’t have to stretch or balance on step ladders to reach things you need daily, since it can lead to falls.
  • Use Smart Flooring to prevent falls. For example, invest in anti-slip tiles for bathrooms and kitchens to avoid sliding on water or polished surfaces, and ensure that all rugs have anti-slip mats underneath to prevent slipping across the floor.
  • Consider Motion Activated Lighting. Install lighting with sensors to turn on when movement is detected, especially on stairs and in bathrooms.
  • Make the Garden Safe. Clear moss and old leaves from the paths to minimize the risk of slippery spaces. Avoid too many pots and ornaments as they are easy to trip over. Install lighting, so you can see your way along paths in the dark.
  • Get Rid of Clutter. Clearing clutter from steps and floors helps you to avoid slips and trips. Don’t leave things on the floor where they can cause a hazard.
  • Try Posture Exercises. Pilates and yoga will help you avoid falling by maintaining good balance, core strength and posture techniques. Some exercises are chair-based. However, most are gentle and set at a pace that the group can follow.
  • Install Handrails to Keep You Steady. Get handrails in all high-risk places, such as the shower or stairs, to prevent falls.
  • Make Your Bathroom Safe and Functional: Falls often occur in the bathroom. Today’s bathroom can include the Assisto bathtub, which features an easily accessible and ergonomic design that reduces the risk of injury and falls.
  • Voice-Controlled Assistance Devices: Play music, make calls, set music alarms and timers, ask questions and control smart home devices.

Reference: Yahoo Finance (May 8, 2023) “Prevent 300,000 Fall-Related Hospitalizations with Simple Aging in Place Home Modifications According to Lisa M. Cini”

Why Would I Put My Home in a Trust?

Putting property in a trust can make managing and distributing your assets — including your home — easier after your death. It can also have legal and tax benefits.

Bankrate’s recent article entitled, “How, and why, to put your home in a trust,” says that a real estate trust is a legal arrangement in which the owner of a home, known as the “grantor” or “settlor,” transfers ownership of the property to another entity or individual, known as the “trustee.” The trustee manages the property for the benefit of the grantor and any named beneficiaries of the grantor’s estate.

You can place your home into a trust by signing a deed that names the trustee as the property’s new owner. The deed must be recorded with the local county recording office, and then the trust is the legal owner of the property.

The home’s original owner will usually name him- or herself as the trustee, so they can maintain control of the property. However, the original owner can name someone else as the trustee. This can be helpful in case the original owner passes away. Trustees are frequently adult children of the homeowner, who will inherit the property upon the homeowner’s death.

Trusts are often used for tax, estate planning, or asset protection purposes, as — depending on the type of trust — the property can be protected from creditors and transferred directly to the beneficiaries without going through probate. Two primary types of trusts pertain to real estate: revocable and irrevocable.

Also called a living trust, a revocable trust can be changed or dissolved at any time by the grantor (creator) of the trust. A revocable trust lets a grantor control the property and make changes to the trust during their lifetime. The grantor retains the right to modify or dissolve the trust. The grantor can act as a trustee, manage the property, or appoint someone else.

A revocable/living trust states the original homeowner’s wishes upon death. When the grantor passes away, the property in the revocable trust is distributed to the grantor’s beneficiaries according to the terms of the trust agreement.

An irrevocable trust, as the name implies, is more permanent and can’t be terminated or modified by the grantor after it’s been created, unless the beneficiaries agree to the change.

Reference: Bankrate (February 21, 2023) “How, and why, to put your home in a trust”

More CPAP Benefits for Early Birds?

A study recently showed that patients with the morning chronotype used their CPAP machines for 32 more minutes per night compared with their intermediate chronotype counterparts over six months of use, according to Melissa Knauert, MD, PhD, of Yale University School of Medicine in New Haven, CT, and colleagues. Their research has been published in Annals of the American Thoracic Society.

“Understanding that chronotype can influence adherence to CPAP is another tool in the kit for sleep doctors to predict who might have trouble using CPAP and focus on patients at higher risk of not using their CPAP,” she told MedPage Today. “Ultimately, as we study and improve our understanding of the relationship between chronotype and CPAP use, we can develop specific therapies targeted at patients with non-morning chronotypes.”

MedPage Today’s recent article, “’Early Birds’ With Sleep Apnea May Get More CPAP Benefits,” explains that chronotype was defined by the Morningness-Eveningness Questionnaire (ME, which measures when a person’s circadian rhythm produces peak alertness. The researchers found that patients in the morning group were less likely to report feeling unrested during the day compared with the intermediate and evening groups. Here’s the breakdown:

  • Morning (MEQ 59 or above): 17.4%
  • Intermediate (MEQ 42-58): 28.3%
  • Evening (MEQ 41 or lower): 41.0%

The primary analysis of APPLES (Apnea Positive Pressure Long-term Efficacy Study), first reported in 2012, showed that treating sleep apnea with CPAP devices improved subjective and objective measures of sleepiness, especially among patients with severe OSA, versus a sham device. In addition, Sleepiness and functional status improve with each hour of CPAP use. Nevertheless, Dr. Knauert explained that sleep apnea is often hard to treat because many patients cannot use CPAP effectively.

Even within clinical trials, only 39-42% of patients use the device for more than four hours a night, and many patients stop CPAP use altogether. In the U.S., only 40-60% of the estimated 30 million patients with OSA remain adherent long-term.

“Anything and everything that we do to understand and improve CPAP use will have tremendous health benefits,” she said. “Understanding the mechanisms by which circadian biology impacts health is a large, untapped area for future research.”

Overall, 65% were men, and most had severe OSA and obesity, with an average body mass index (BMI) of 32, researchers said. Patients in the evening group were younger and less likely to be married. However, no significant differences in sleep apnea characteristics were noted between groups.  There were also no differences in insomnia or sleepiness. Anxiety was highest among participants with an intermediate chronotype.

On average, patients slept about seven hours per night. However, on the weekends, morning chronotype patients reported slightly shorter sleep duration than the intermediate and evening groups (7.3 vs. 7.6 and 7.9 hours per night).

Reference: MedPage Today (April 1, 2023) “’Early Birds’ With Sleep Apnea May Get More CPAP Benefits”

What’s the Latest on Benefits for Families of Service Members?

Dependent care flexible spending accounts are one of six measures announced recently by defense officials to address some needs in parental leave, childcare, education and career advancement for military spouses.

Military Times’ recent article entitled, “DoD to offer tax-saving child care accounts, other benefits for troops,” reports that the memorandum, signed by Secretary of Defense Lloyd Austin, also expands eligibility for the popular My Career Advancement Account (MyCAA) financial assistance program, to include spouses of service members in paygrades E-6 and O-3. The program, which provides up to $4,000 for obtaining a professional license, certificate, or associate degree, was available to spouses of troops in pay grades E-1 to E-5, W-1 and W-2, and O-1 and O-2 only. In addition, Secretary Austin also requires improvements to the Exceptional Family Member Program within 90 days.

The dependent care flexible spending accounts will let service members earmark up to $5,000 in pretax income, through payroll deductions, for eligible dependent care expenses. Officials hope to implement these accounts for service members by this year’s open season, which begins in mid-November.

A recent DoD survey of active-duty spouses found that 38% of those with children at home routinely use childcare.

According to Internal Revenue Service regulations, a dependent care flexible spending account can be used to pay for home and child center care, preschool, summer day camp, before and after school programs for children up to age 13 and adult day care. The money is deducted from the service member’s gross pay and deposited into the account before taxes are calculated. Childcare bills are then paid with those funds. The end result is a lower tax bill.

In addition, married service members with one child with eligible childcare expenses could get a tax benefit by contributing $5,000 to a dependent care flexible spending account. For them, the tax decrease ranges from $382.50 to $1,382.50, depending on their overall income. A 2021 DoD demographics report shows that 35% of active-duty members have children. Of those, nearly 42% have at least one child, five or younger. Another 33% have at least one child in the six to 11 age group.

In addition to these new accounts and expanded eligibility for MyCAA, Austin’s memo announced improvements to the Exceptional Family Member Program, universal prekindergarten at Department of Defense Education Activity schools and professional license portability.

Reference: Military Times (March 22, 2023) “DoD to offer tax-saving child care accounts, other benefits for troops”