More
than 40% of women and more than half of men over 50 who get divorced end up
remarrying, according to Census Bureau data.
For
folks like these, all sorts of financial considerations can complicate the
question of whether and how to go about remarrying.
Some things get easier with
age. Marriage, however, is full of its
own unique challenges, no matter what your age. And marrying later in life brings its own
unique challenges when it comes to financial plans and legal matters.
For golden-year newlyweds, some
of the questions are familiar: “should we have separate accounts or joint
accounts?” “Should we file taxes individually or file jointly?” “Will we live
in your house, or mine?”
Essentially, young married
couples simply don’t have as many accounts, assets, liabilities, health
concerns, dependents, or complex family relationships as their older
counterparts. For them, marriage might be as simple as saying “I do” and
combining their combined resources of “zero.”
If you haven’t thought through
the potential challenges, here are a few to get you started:
Social Security and pension benefits
Healthcare, health needs, and Medicare benefits
Past marriages and alimony
Children and college financial planning
Your estate, your heirs, and your beneficiaries
You should also consider how you
intend on paying for future long-term care costs. For example, even if you have
a prenuptial agreement to keep you and your spouse’s assets separate, you still
may have to spend a great deal of your own assets on the cost of caring for
your spouse, particularly if they ever need to apply for Medicaid to pay for a
nursing home.
When making your financial, tax
and estate plans, don’t go it alone. Be sure to engage competent professional
counsel to help you craft a plan.
This
uncomfortable, ethically questionable, confusing scene over Ms. Bayliss’ end of
life did not have to happen the way it did.
If you don’t want to be in that kind of situation, you need to be
responsible for deciding what you want and communicating it to those who will
have to act on your behalf.
Recently, an elderly woman named
Lorraine Bayless collapsed at the Glenwood Gardens nursing home. Because
nursing homes are generally full of people in poor health, that fact alone is
unremarkable. But the 911 call that
resulted made national news for what sounded unbelievably harsh and cold behavior
on behalf of the facility’s staff.
You see, after Lorraine fell
into cardiac arrest the facility was unable to administer CPR, despite the
pleading of the 911 operator. Why? “Company policy.”
Here are four key facts
regarding this story. First, Lorraine was having a stroke, and CPR was not
likely to help her. Second, the “nursing facility” was actually an independent living facility without
skilled nurses (like RN’s). Third, Lorraine herself had not wanted a long drawn
out passing; and fourth, Lorraine and her family already had arranged for a Do
Not Resuscitate (DNR) order.
Against this backdrop, each of
us needs to know two fundamental wishes when it comes to our loved ones:
1) What does your loved one want and need in a
facility? Since the facility in question was not an actual nursing home and
the “nurse” was not actually a skilled nurse, the staff was not allowed to
perform CPR, both by “company policy” and by law. There are many types of
facilities with varying degrees of medical or personal care. Truly, to be in
the “wrong” facility may mean not limiting the care your loved one may want.
2) Likewise,
what does your loved one want (or not
want) when it comes to end-of-life measures? What decisions has your loved
one made regarding emergency care, resuscitation, breathing or other
life-sustaining apparatuses? Lorraine purposefully had a DNR, had made her
decision, and her family clearly knew her wishes. Nevertheless, there are many
additional considerations when it comes to making and communicating your
wishes.
Putting your wishes in writing
helps to ensure that your family and medical team know what you want, and don’t have to guess at what you would have wanted. The most common form is known by many
different names, but is simply a written record of their healthcare directives
made in advance.
There are several options
available with some variation as to what they are designed to accomplish. This includes a “living will,” an “advance
directive,” a “healthcare proxy,” or a “durable power of attorney for
healthcare.”
Regardless of what document you
choose, the goal is to empower your senior loved ones to inform their loved ones, doctors and medical or
long-term care facilities about their wishes now so those wishes can (and will) be carried out later. And, once
executed, copies of the health care directives should be liberally distributed
among agents, non-agent family members, doctors and medical facilities. As
these end-of-life wishes also are emotional decisions, it is best if everyone
concerned is informed rather than surprised.
Of course, waiting until you are
classified as a “senior citizen” to undertake this kind of planning is not a
good idea either. The time to make your wishes known is now, while you’re in
good spirits and of sound mind and body.
As the Bayless family learned, having your wishes carried out can be
hard—but without a plan no one will know what those wishes are.
The blessings of wealth can be yours, but
they are not delivered on a silver platter. Counter intuitive as it may seem,
you must work for them. But your hard work will yield ample rewards.
We’ve all seen stories of
wealthy children, privileged with every worldly advantage, who for one reason
or another grow up to be spoiled, irresponsible adults. On the other hand,
there are plenty of examples of the same kinds of people who grow up to be successful,
responsible, well-balanced adults.
There’s plenty of room for
argument over whether inherited wealth is a blessing or a curse. Consider two
intriguing articles same author—who reaches two different conclusions on the
subject. The articles recently appeared in Forbes
and are titled “Why Family Wealth Is A Curse” and “Why Family Wealth Is A Blessing.” The author even has some first-hand
experience—he’s a member of the family that founded a little business called
the Georgia-Pacific Corporation.
The curses the author identifies are “too much too soon,” “too much of
a financial focus,” and “ingratitude.” In contrast, the author notes blessings that include “love,”
“choices,” and “gratitude.”
So, how can you ensure that your
own heirs land safely on the “blessings” side? The author recommends open
communication and teamwork between and among family members, including members
of multiple generations.
Although the article is written
from the perspective of an “inheritor,” there are several good lessons for anyone
planning their estate. But the fundamental lesson is that the failure to
prepare your loved ones to receive their inheritance may result in a failure to
protect them from the potential curses of inherited money. Like the old saying: easy come, easy go.
With more than 50 percent of first marriages
failing and 75 percent of the partners remarrying, “blended” families — which
include children from earlier unions — have become the norm.
When you have a mixture of
children and parents of various marriages and biological/legal relationships,
you have what’s often called a “blended family.” If your family is blended, you
need to be particularly careful when planning your estate.
Of course, every blended family
is unique. Some are created early in children’s lives, while others come
together later in life. One or both
spouses may be widowed or divorced, even multiple times with multiple “sets” of
children from prior relationships. As you can see, things can get complicated
very quickly.
It always comes down to who will
inherit what, when will they inherit it, and who will control the inheritance?
Throwing inheritance issues into
the often delicate balance of a blended family, and everything can explode like
nitro and glycerin shaken together, as The Poughkeepsie Journal recently discussed
in an article titled “Plan estate carefully for blended family.”
Importantly, communication can
head off many potential conflicts before the spin out of control. Blended
families who are open and share at least the general contours of their estate
plans (and their reasoning behind their choices) tend to have fewer disputes.
At the end of the day, no one is
in a better position than you to know whether your family is likely to squabble
over your assets when you’re not there to referee. Talk with your family, then talk with a
qualified estate planning attorney.
I just inherited some stock from my uncle,
and I know that he bought the stock for more than the present cost. Should I
find the original cost, or do I use the cost as of the date I inherited the
stock?
If you ask any accountant or
business owner, calculating the cost of something is never as easy as it might
sound. But when it comes to figuring out the “cost basis” for stock the task
can seem impossible. While tough to calculate, “cost basis” is incredibly
important when it comes tax time, particularly if you inherited the stock.
If you think about it, stock
represents a value that is forever changing on the basis of the market itself.
Those ups and downs can make it a bit difficult to calculate actual gain over
the life of one individual. The wrinkle of how to count for those changing
values when stock passes from the hands of that one individual to another makes
the wrinkle more challenging.
For a basic introduction to
“cost bass” and the value of inherited stock, consider reading a recent Kiplinger article titled “Cost Basis for Inherited Stock.”
Planning for your estate means
understanding what your assets are and what their value is to your heirs.
Accordingly, the understanding of cost basis is imperative to you and your
heirs.
Seniors who convert a regular IRA into a
Roth account can reduce their estate taxes and eliminate the income tax their
heirs would otherwise have to pay on withdrawals taken from an inherited
regular IRA.
Even though a tool may not originally
be designed for the job at hand, it doesn’t mean that the tool won’t get the
job done. One such tool in the estate planning world is the Roth IRA.
As with an IRA of any stripe,
the Roth IRA is a retirement account. Unlike its plain vanilla “traditional” IRA
cousin, however, the Roth IRA offers significant estate planning opportunities.
When it comes to retirement and estate planning, wouldn’t it be nice to kill
two birds with one stone?
A recent SmartMoney article titled “Estate Planning With a Roth IRA”
tackles the salient differences between a plain vanilla IRA and a Roth IRA,
noting that a fundamental distinction is when the income tax is paid
(i.e., upon deposit or at withdrawal).
The article also explores some other important distinctions.
You pay taxes only upon
withdrawal from a plain vanilla IRA, not upfront upon contribution. The result
is that every cent can appreciate safely without taxation until the day that
you (and the IRS) can start drawing from the account. In addition, shortly
after you reach age 70 ½ annual withdrawals become mandatory. These are known
as Required Minimum Distributions (RMDs).
On the other hand, a Roth IRA is
a plain vanilla IRA in reverse. You pay income taxes upfront at deposit.
Result: every cent post-contribution appreciates safely without taxation
thereafter. Period.
Obviously, this tax-free feature
can come in handy for retirement, but consider its inheritance benefit too.
What if you were to leave a Roth IRA to an heir by listing them as a
beneficiary? First, there is no income taxation burden that accompanies the
Roth IRA when withdrawn by your heir. Second, the heir can elect to receive it
as a tax-free lump sum or, what is often more useful, take scheduled RMDs over
their lifetime much like an annuity (but without any income taxes due).
Be sure to consult with
qualified estate planning attorney and your financial consultant to evaluate how to leverage a Roth IRA
for yourself and your loved ones.
Veronica, age 75, is struggling with a
dilemma. Her husband, 10 years older,
is “losing it” as she put it. He is dangerous because he is so forgetful. Mort
is neglecting to pay the bills and make deposits. She was very shocked and
stressed about collection notices and pushy bill collectors on the phone.
Has an elderly family member
started to show signs of memory problems? While there are plenty of obvious
concerns, one potentially less-obvious concern is the financial implications of
memory loss.
Learn about the assets and financial responsibilities
you and your loved one have.
Take time to get to know your loved one’s financial
advisor, accountant, broker and banker.
Do not accept financial illiteracy.
Accept the potential responsibility you may have one
day as a way of protecting yourself against fraud and financial abuse.
Check your legal documents and be sure that you have
what is needed to take over financial management if that time comes.
Each of these points is
important, but I’ll add one more: don’t ignore the issue.
While it can be hard admitting
that a loved one is “losing it” cognitively, financial trouble is certainly not
got to help their situation at all. If you’re already at that point, consider
calling a family meeting to coordinate your plan of action.
Even closer to home, take a good
look in the mirror. Do you have your own estate plan in place so your loved
ones could take care of your financial matters? Remember, the time to do your planning is
now, while you’re healthy and of sound mind.
The Elder
Consumer Protection Program at the Stetson University College of Law recently
released an alert regarding a new Medicare scam involving direct deposits.
The scammer will call a Medicare recipient and warn them that their
benefits will soon cease if they do not provide their bank account information
for "direct deposit" of their Medicare benefits. In reality,
the scammer just wants to clean out the victim’s bank account.
According to the Stetson University alert, the scam is fiendishly
clever:
The
scammer’s pitch may sound authentic to seniors because the Social Security
Administration has recently moved to a direct deposit system, allowing monthly
Social Security funds to be deposited straight into a recipient’s account.
However, as we know, Medicare is a vastly different program because it does not
distribute funds or benefits directly to beneficiaries.
The full
alert contains some tips on how to avoid falling victim to this type of
scam. If someone you love may be at risk
for this type of scam, be sure to pass along the warning. You can read the full alert at the link here.
While life insurance has long been priced by
sex, companies that provide long-term care insurance (LTCI), mainly used to
cover healthcare expenses in old age or for severe illness, have long avoided
it. But for the first time this year, they will introduce gender-based pricing,
starting with policies from Genworth Financial Inc., the nation's largest
seller.
It’s no secret that a huge
number of baby boomers will be retiring soon. And, as time marches on many of
those folks will eventually need long-term care. The providers of long-term
care insurance (LTCi) haven’t been able to make the kinds of profits they would
like on the product, which means that it is becoming more complicated and increasingly
pricey.
And as LTCi policies start
ratcheting rates, women as a group shouldn’t delay—after all, they tend to be
the longer-living sex. But unlike life insurance policies, LTCi policies have generally avoided gender-based pricing, as discussed by Reuters in a recent article titled “Long-term care policies will soon cost more
for women.”
Because women tend to live longer than men, at least one insurer is going to follow
the actuarial numbers and will begin charging women more.
Genworth Financial Inc., the
largest seller of these LTCi products, announced that it will introduce new
rates for new policies procured by women individually by as much as 20 to 40
percent. You should note that (at least for now) rates won’t increase on
married couples purchasing the same policies.
It’s hard to imagine the cost of
LTC insurance going anywhere but up in the near future. Now might be a great
time to assess your own needs.
Pope Benedict, 85, is reportedly the first
pope to retire in almost 600 years, which made his decision all the more momentous.
But since the pope believed his health issues were impacting his job, the
decision seems relatively clear-cut. For the growing number of retirement-aged
professionals who are still hale and hearty, however, the decision gets more
complicated.
The recent retirement
announcement from Pope Benedict XVI was a surprise, although technically not
unprecedented—after all, Pope Gregory the XII stepped down back in 1415. But
what how does a pope plan for retirement? Recently, Saturday Night Live ran a
spoof advertisement for “Papal
Securities,” which addresses the unique financial planning needs of a
newly-retired pope.
Most ordinary folks plan to
retire someday. For us, the decision is not if we will retire, but when we will
retire, and how will we know it’s the best time to do so? For example, many
lawyers work well past the ordinary retirement age, even if they begin handling
a reduced payload.
A recent Marketwatch article titled “Retirement lessons from Pope Benedict”
explored this timely issue. And while they are unlikely to release a puff of
white smoke to announce your successor, a succession plan is still important to
ensure a smooth transition when you are ready to step down.
Aside from the business aspects,
on a personal level make sure your advance health care directives are current in the
event you became infirm or incapacitated. While you’re at it, a good
top-to-bottom review of your estate planning might be a good idea.
Whether you are responsible for a
flock of millions, or just a few employees, the takeaway is the same—preparation
is the key to a smooth transition of power. As always, be sure to seek
appropriate counsel regarding your retirement and/or succession plans.
More than 40% of women and more than half of men over 50 who get divorced end up remarrying, according to Census Bureau data.
