What Is Elder Law?

Estate planning concerns distributing assets after one dies, including the use of last wills, trusts and preparing the estate to minimize assets passing through probate. Elder law is more focused on protecting the individual during their lifetime.

Elder law provides people with legal rights and protections, as they become older and become vulnerable. The field of elder law covers a range of issues impacting seniors, including long-term care planning options, end-of-life and estate planning and problems including nursing home abuse or neglect. There are a variety of issues for which seniors benefit from legal assistance, says a recent article titled “Elder Law: A Complete Guide” from Forbes.

Medicare Planning and Social Security. An elder law attorney can help seniors understand their options to maximize Social Security benefits. Claiming benefits before full retirement age results in a reduction in monthly benefits, while a delayed claim leads to a larger monthly income. Signing up for Medicare can be daunting, with so many options and decisions to be made. An elder law attorney can help get it right the first time.

Incapacity Planning. While one can become incapacitated at any time in life, the chances of becoming physically or mentally impaired increase as one ages. Having a living will allows you to specify what kind of medical treatments you want to accept or decline. A durable power of attorney allows you to name an agent to control your assets, and a healthcare power of attorney lets another person make medical decisions on your behalf.

Guardianship. If no incapacity planning has been done and action needs to be taken on your behalf, the court will assign a guardian. This could be a family member, or if none is available or the court does not deem the family member to be a good candidate, a professional guardian might be assigned.

It takes time for a person to be declared legally incapacitated and for a guardian to be appointed. The process can be costly and is stressful for all concerned.

Long-Term Care Planning. Someone turning 65 today has as much as a 70% chance of needing some type of long-term care during their lifetime. Long-term care planning addresses making decisions in advance for having care at home or moving into a nursing home for rehabilitation or as a permanent resident. Long-term care planning includes planning for Medicaid and protecting assets.

Elder Abuse Laws. Unfortunately, seniors are vulnerable to abuse, especially when they must rely on others for care. Elder abuse laws exist to protect you from physical, mental, emotional, sexual, or financial abuse. An elder abuse claim can be pursued to recover compensation for medical bills, loss of assets, emotional distress, or physical pain.

An elder law attorney can help create a plan to address issues and protect those who are lucky enough to enjoy a long life.

Reference: Forbes (Jan. 11, 2023) “Elder Law: A Complete Guide”

What’s the Most Common Debt for Retirees?

A recent survey of about 2,000 American retirees between the ages of 62 and 75 found many of them burdened with debt.

Some likely ran out of time to pay off their debts before retiring. Others may have entered the red or simply deepened their debt level after leaving work.

Money Talks News’ recent article entitled “This Is the Most Common Debt Among Retirees — by Far” provides the most common type of debt retirees report — along with other debts that are part of retirement for many people.

Credit card debt. Retirees who said they had this type of debt in 2022 was 40%, compared to 42% in 2020. Credit card debt is almost always expensive, but it’s much worse if you don’t have a regular paycheck to help you pay bills.
Mortgage. Retirees who said they had this type of debt in 2022 was 30%, with no report for 2020. A home loan is one of the few types of borrowing that can be classified as “good debt.” Many experts suggest paying off a mortgage before retirement. but others argue against such a strategy.
Auto loans. Retirees who said they had this type of debt in 2022 was 23%, and in 2020, it was 30%. Unless you saved a bunch, an auto loan is hard to avoid, retired or not. As a result, about a quarter of retirees still are paying off this type of loan.

Retirees said they also are carrying these types of debt in 2022:

Medical debt: 11%
Home equity loan: 7%
Student loan: 4%
Business loan: 1%

Reference: Money Talks News (Jan. 9, 2023) “This Is the Most Common Debt Among Retirees — by Far”

What Is Needed in Estate Plan Besides a Will?

Having a will is especially important if you have young children, says FedWeek’s recent article entitled “Estate Planning Doesn’t Stop with Making a Will.” In your will, you can nominate guardians, who would raise your children in the event neither you nor your spouse is able to do so.

When designating a guardian, try to be practical.

Remember, your closest relatives—like your brother and his wife—may not necessarily be the best choice.

And keep in mind that you’re acting in the best interests of your children.

Be sure to obtain the consent of your guardians before nominating them in your will.

Also make sure there’s sufficient life insurance in place, so the guardians can comfortably afford to raise your children.

Your estate planning isn’t complete at this point. Here are some of the other components to consider:

Placing assets in trust will help your heirs avoid the hassle and expense of probate.
Power of Attorney. This lets a person you name act on your behalf. A “durable” power will remain in effect, even if you become incompetent.
Life insurance, retirement accounts and payable-on-death bank accounts will pass to the people you designate on beneficiary forms and won’t pass through probate.
Health care proxy. This authorizes a designated agent to make medical decisions for you, if you can’t make them yourself.
Living will. This document says whether you want life-sustaining efforts at life’s end.

Be sure to review all of these documents every few years to make certain they’re up to date and reflect your current wishes.

Reference: FedWeek (Dec. 28, 2022) “Estate Planning Doesn’t Stop with Making a Will”

What’s the Most Common Type of Debt for Retirees?

The goal of beginning your retirement in the black is admirable, the reality can be quite different.

Money Talks News’ recent article entitled “Sadly, This Is by Far the Most Common Debt Among Retirees” reports that a recent survey of 1,998 American retirees between the ages of 62 and 75 found that many retirees have debt.

Some likely ran out of time to pay off their debts before retiring, and others may have entered the red or simply deepened their debt level after leaving work.

Whatever the reason, these are the most common types of debt that retirees report — along with other debts that are part of retirement for many people.

Credit card debt. A total of 40% of retirees said they had this type of debt in 2022, compared to 43% in 2020.

Credit card debt is almost always expensive, but it’s much scarier when you do not have a regular paycheck to help you pay bills.

Mortgage. Retirees who said they had this type of debt in 2022 was 30% and is not available for 2020.

A home loan is one of the few types of borrowing that can be classified as “good debt.” Some experts say paying off a mortgage before retirement is advisable, but others argue against such a strategy.

Car loans. Retirees who said they had this type of debt in 2022 was 23%, compared to 30% in 2020.

Unless you have a lot of money in savings, an auto loan is hard to avoid — whether you are retired or not. Therefore, it makes sense that nearly a quarter of retirees are still paying off this type of loan.

Less common types of debt. Retirees said they’re also carrying these types of debts in 2022:

Medical debt: 11%
Home equity loan: 7%
Student loan: 4%
Business loan: 1%

Reference: Money Talks News (Oct. 20, 2022) “Sadly, This Is by Far the Most Common Debt Among Retirees”

Can a Trust Be Created to Protect a Pet?

For one woman in the middle of preparing for a no-contest divorce, the idea of a pet trust was a novel one. She was estranged from her sister and didn’t want her ex-husband to gain custody of her seven horses, three cats and five dogs if she died or became incapacitated. Who would care for her beloved animals?

The solution, as described in the article “Create a Pet Estate Plan for Your Fur Family” from AARP, was to form a pet trust, a legally sanctioned arrangement providing for the care and maintenance of companion animals in the event of a person’s disability or death.

Creating a pet trust and establishing a long-term plan requires state-specific paperwork and funding mechanisms, which are different from leaving property and assets to human family members. An experienced estate planning attorney is needed to ensure that the protections in place will work.

Shelters nationally are seeing a big increase in animals being surrendered because of COVID or people who are simply not able to take care of their pets. Suddenly, a companion pet accustomed to being near its human owner 24/7 is left alone in a shelter cage.

When pet parents have not made plans for their pets, more often than not these pets end up in shelters. However, not all animal shelters are no-kill shelters. In 2021, data from Best Friends Animal Society shows an increase in the number of pets euthanized in shelters for the first time in five years.

For pet owners who can’t identify a caregiver for their companions, the best option may be to find an animal sanctuary or a shelter providing perpetual care.

The woman described above had a pet trust created and funded it with a long-term care and life insurance policy. The trust was designed with a board of three trustees to check and balance one another to determine how the money will be allocated and what will happen to her assets. Her horse property could be sold, or a long-term student or trainer could be brought in to run her barn.

It is not legally possible to leave money directly to an animal, so setting up a trust with one trustee or a board is the best way to ensure that care will be given until the animals themselves pass away.

The stand-alone pet trust (which is a living trust) exists from the moment it is created. A dedicated bank account may be set up in the name of the pet trust or it could be named as the beneficiary of a life insurance or retirement plan.

A pet trust can also be set up within a larger trust, like a drawer within a dresser. The trust won’t kick in until death. These plans prevent the type of delays typical with probate but is problematic if the person becomes incapacitated.

If a trust is created as part of another trust, there can still be delays in accessing the month, if the pet trust is getting money from the larger trust.

With costlier animals likes horses and exotic birds, any delay in funding could be catastrophic.

How long will your pet live? A parrot could live for 80 years, which would need an endowment to invest assets and earn income over decades. A long-living pet also needs a succession of caregivers, as a tortoise with a 150 year lifespan will outlive more than one caregiver.

Reference: AARP (Sep. 14, 2022) “Create a Pet Estate Plan for Your Fur Family”

Can I Retire in a Bear Market?

Money Talks News’ recent article entitled “Retiring in a Bear Market? 7 Things to Do Now” says that research has shown that this scenario — known as sequence-of-return risk — can permanently reduce the amount of money you will have to live on during retirement. However, savvy retirees can avoid most or all of this damage. If you’re planning to retire right into the teeth of a bear market, consider the following:

Meet with a money pro. If you make the wrong decisions here, it can have life-altering effects. This is the perfect moment to speak with a financial adviser. The right pro can help you develop a plan.

Tighten your spending. A bear market may mean you must downsize your grand visions. The more money you keep in your wallet when the market is down, the better off you’re likely to be when the bull market returns. When the market recovers, you can pick up your dreams where you left them.

Use your savings. A great way to avoid permanently ruining your finances in retirement is to have cash savings to use when stocks collapse. Living off your liquid savings keeps you from having to cash in stocks when their value is depressed, which allows your portfolio time to recover.

Consider your Social Security options. When retiring into a bear market, you either have to take Social Security now, so you can leave your investments alone and give them more time to recover; or wait to claim Social Security, hoping that there will be bigger checks later in retirement that will help cushion the blow, if your other finances do not recover robustly. There’s no simple answer, and many factors can help you determine which strategy is best. These include your health, your risk tolerance, your marital status and many other considerations.

Review your asset allocation. Bear markets are the ultimate test of your tolerance for risk. With stocks down at least 20% — the definition of a “bear market” — consider your feelings. This can help you determine if your asset allocation is too risky, too conservative, or just right. Making certain that your allocation matches your risk tolerance will put you in a better position for the next bear market.

Going back to working. Bear markets rarely last long, often disappearing in less than a year. A part-time job or freelance work can give you a bit of extra income to ride out the storm, possibly even allowing you to leave all of your savings untouched. When the market recovers, you can return to your full-time retirement.

Stay calm. The tendency is to panic. Resist the urge.

Reference: Money Talks News (July 25, 2022) “Retiring in a Bear Market? 7 Things to Do Now”

Will Inflation Have Impact on My Retirement?

Inflation means fluctuations to the dollar’s purchasing power may have a significant effect on a retiree’s ability to cover costs of living and maintain a quality of life, says Kiplinger’s recent article entitled “Is Inflation Costing You More as a Retiree?”

Why Could Inflation Impact Disproportionately Retirees. Inflation impacts people differently. There are many who may not feel the effects of inflation when compared to others. However, retirees tend to spend larger portions of their income on items highly impacted by inflation, such as housing, food, gas and health care, all of which are seeing the full effect of inflation.

The recent rise of inflation forces a lot of retirees to address tough questions about how to protect their retirement savings, while covering their costs of living.

The Cost of Inflation. Retirees’ sources of income may be at risk to large inflation spikes. Retiree likely have most of their income tied to markets or in fixed income. These two sources are highly impacted by inflation. Social Security does offer COLAs, but the last increase was 5.9%, which falls short of the 8% to 9% increase in prices we’ve seen over the past year.

Retirees frequently use savings to get them through retirement. However, when inflation happens, the purchasing power of savings declines. As a result, retirees must withdraw larger amounts of savings to cover the costs of living. This shrinks the lifespan of retirement savings.

Protect Yourself with Hedges against Inflation. Inflation-protected securities can be a way to keep income on pace with inflation. Treasury Inflation-Protected Securities, commonly known as TIPS, offer an interest distribution rate that keeps pace with the CPI inflation rates. This investment has helped retirees mitigate inflation and maintain their quality of life throughout retirement without worrying about outliving their savings.

Retirees and their savings face a stormy forecast ahead due to inflation. Income sources for retirees are largely inflation-exposed, and their spending habits tend to be on products and services affected by inflation.

Reference: Kiplinger (July 16, 2022) “Is Inflation Costing You More as a Retiree?”

How Do I Maximize My IRA?

IRAs are valuable tools for retirement savings because they offer tax benefits in exchange for putting aside money for your golden years. Money Talks News’ recent article entitled “8 Ways to Maximize Your Traditional or Roth IRA” explains that contributions to IRAs are capped at $6,000 per year for most people, and that can make it difficult to amass the $1 million some people suggest is needed for retirement. Nonetheless, you can maximize your IRA contributions – both this year and over time – by using these ideas.

Know your IRA options. See if you’re eligible to open a specialized IRA with a higher contribution limit. Self-employed people can also contribute to a SEP IRA. These Simplified Employee Pension plans let workers save 25% of their compensation.
Don’t forget about the catch-up contributions. When you reach 50, you’re eligible to make catch-up contributions to traditional and Roth IRAs. It’s another $1,000 a year. Therefore, everyone age 50+ can contribute a total of $7,000 to their IRA for 2022.
Take advantage of a spousal IRA. You typically need to earn taxable income to contribute to an IRA. However, there’s an exception for spouses. A non-working spouse can set up and contribute to an IRA, as long as their spouse has taxable income. However, if you file your taxes separately, you’ll miss out on this opportunity. Your total IRA contributions also can’t exceed the taxable income reported on your joint return.
Make regular contributions throughout the year. If you wait for a year-end bonus to make your annual IRA contribution, you might be shortchanging yourself. Try to make small monthly contributions. Known as dollar-cost averaging, this makes saving money a habit and can result in more efficient investments. It may help your IRA grow more quickly.
Start contributing as early as possible. It’s never too early to begin saving for retirement, so open an IRA as soon as you’re able and start your deposits as early in the year as possible.
Look into a Roth conversion. Both traditional and Roth IRAs offer tax advantages. However, they differ. A traditional account offers an immediate tax deduction on contributions and then taxes withdrawals in retirement as regular income. With a Roth, there’s no tax deduction for contributions. However, the money is tax-free in retirement. If you have a traditional IRA, you can convert it to a Roth account.
Invest for the long term. As far as your money in your IRA, “set it and forget it.” Moving it around frequently could incur fees and selling off investments during a down market simply means you’ll be locking in losses. Determine the appropriate investment strategy for your goals and risk tolerance and then stay with it. And remember that you may have to ride out some short-term bumps in the market to maximize your long-term gains.
Talk to an expert. For savvy investors and those with the time and inclination to research investment choices, managing an IRA can be a viable option. For others, using a professional can save time and may result in better returns.

Reference: Money Talks News (Dec. 20, 2021) “8 Ways to Maximize Your Traditional or Roth IRA”

How Do IRAs and 401(k)s Fit into Estate Planning?

When investing for retirement, two common types of accounts are part of the planning: 401(k)s and IRAs. J.P. Morgan’s recent article entitled “What are IRAs and 401(k)s?” explains that a 401(k) is an employer-sponsored plan that lets you contribute some of your paycheck to save for retirement.

A potential benefit of a 401(k) is that your employer may match your contributions to your account up to a certain point. If this is available to you, then a good goal is to contribute at least enough to receive the maximum matching contribution your employer offers. An IRA is an account you usually open on your own. As far as these accounts are concerned, the key is knowing the various benefits and limitations of each type. Remember that you may be able to have more than one type of account.

IRAs and 401(k)s can come in two main types – traditional and Roth – with significant differences. However, both let you to delay paying taxes on any investment growth or income, while your money is in the account.

Your contributions to traditional or “pretax” 401(k)s are automatically excluded from your taxable income, while contributions to traditional IRAs may be tax-deductible. For an IRA, it means that you may be able to deduct your contributions from your income for tax purposes. This may decrease your taxes. Even if you aren’t eligible for a tax-deduction, you are still allowed to make a contribution to a traditional IRA, as long as you have earned income. When you withdraw money from traditional IRAs or 401(k)s, distributions are generally taxed as ordinary income.

With Roth IRAs and Roth 401(k)s, you contribute after-tax dollars, and the withdrawals you take are tax-free, provided that they’re a return of contributions or “qualified distributions” as defined by the IRS. For Roth IRAs, your income may limit the amount you can contribute, or whether you can contribute at all.

If a Roth 401(k) is offered by your employer, a big benefit is that your ability to contribute typically isn’t phased out when your income reaches a certain level. 401(k) plans have higher annual IRS contribution limits than traditional and Roth IRAs.

When investing for retirement, you may be able to use both a 401(k) and an IRA with both Roth and traditional account types. Note that there are some exceptions to the rule that withdrawals from IRAs and 401(k)s before age 59½ typically trigger an additional 10% early withdrawal tax.

Reference: J.P. Morgan (May 12, 2021) “What are IRAs and 401(k)s?”

Will Vets Now Get a COLA Increase in Benefits?

The measure was filed by Representatives Elaine Luria, D-Virginia and Troy Nehls, R-Texas, along with Senators Jon Tester, D-Montana and Jerry Moran, R-Kansas. In joint statements, they called the proposal critical to bolstering veteran’s finances, reports Military Times’ recent article entitled “Lawmakers move to guarantee cost-of-living boost for veterans benefits.”

“We have a responsibility to take care of our veterans, many of whom rely on VA for financial support,” said Moran, ranking member of the Senate Veterans’ Affairs Committee.

“As rampant inflation is driving up the cost of living, this legislation helps make certain that veterans are able to keep up with our changing economy and receive the benefits they have been promised.”

The bill linking the two government benefits is largely routine. Lawmakers typically approve the annual proposal to couple VA benefits increases with Social Security benefits increases by large bipartisan margins.

However, this isn’t automatic. Even with the efforts of advocates in the past, an annual cost-of-living increase in veterans benefits requires congressional action.

Social Security benefits, in contrast, are adjusted based on an automatic formula that is triggered whether lawmakers vote on it or not.

In 2021, as inflation pressures began to impact the American economy, that increase was 5.9%. Officials haven’t said what this year’s adjustment may be. However, continued rising costs across the economy could push that figure even higher. The VA COLA increase legislation would apply to payouts for disability compensation, clothing allowance, dependency and indemnity benefits and other VA assistance programs.

“Transitioning from active duty to civilian life is not always easy, and a cost-of-living adjustment is the least we can do for the men, women and families who served our country,” said Luria, herself a Navy veteran.

Tester, who serves as chairman of the Senate Veterans’ Affairs Committee, said the bill will “ensure [veterans] benefits are keeping pace with the changing economy.”

No timetable has been set for when either chamber could vote on the proposal.

Reference: Military Times (May 23, 2022) “Lawmakers move to guarantee cost-of-living boost for veterans benefits”

Estate Planning Blog Articles

Estate & Business Planning Law Firm Serving the Providence & Cranston, RI Areas

What’s the Most Common Debt for Retirees?

What Is Needed in Estate Plan Besides a Will?