Planning

Abbreviations, acronyms, slang, metaphors, simile, hyperbole, puns, idioms – all types of figurative languages.  When you think about it, we have so many forms of languages that the basics – English, French, German, Spanish – seem to be lost in the shuffle. 

In Estate Planning, we have many acronyms that are used and I thought that I would share some of them with you and give you a short simple explanation of them. 

SNT – Special Needs Trust – usually created for the benefit of someone who may be receiving special financial benefits due to a disability.  If the funds were to be paid to the individual outright, they could be disqualified from their benefits.

SLAT – Spousal Lifetime Access Trusts – Trust utilized for transferring wealth outside of an estate with the opportunity to take advantage of the current federal exclusion while providing the donor limited, indirect access to the trust assets.

GRAT, GRUT – Grantor Retained Annuity Trust, Grantor Retained UniTrust – These types of trusts provide for the Grantor to report the income on the trusts while providing for Trust assets to pass to designated beneficiaries upon the Grantor’s death.  There are different payout options within Grantor Trusts – as an annuity or as income. 

DAPT – Domestic Asset Protection Trust – The grantor of the trust, as well as designated others, can receive distributions from the trust in the discretion of an independent trustee.

ILIT – Irrevocable Life Insurance Trust – An irrevocable trust funded with life insurance to avoid having the life insurance considered part of one’s estate and thereby saving estate taxes.

QTIP – Qualified Terminable Interest Property Trust – a trust benefitting the spouse upon the trustor’s death and then to the children after the death of the second spouse. 

CRT – Charitable Remainder Trust – a trust which can benefit the grantor during lifetime with the remainder passing to charities post death.

CLT – Charitable Lead Trust – Donor can donate an asset’s income stream for a period of years to a charity instead of to the remainder interest (a third party).

AEA – Applicable Exclusion Amount – The amount someone can leave free of estate tax (changes annually).

DSUEA – Deceased Spouse Unused Exemption Amount – Amount of unused lifetime exemption from estate tax of deceased spouse able to be available for surviving spouse’s use at time of death to minimize federal estate tax.

QPRT – Qualified Personal Residence Trust – used to transfer interest in residence over a period of years to a designated beneficiary.

These are but a few examples of common estate planning acronyms that are used.  All trusts are not feasible in all situations and, with the help of estate planning counsel, can the identification of appropriate trusts be made given your situation. 

Who will you be when you retire?  Many of us identify ourselves through our career, but when we retire, that identity retires as well.  So, who do you want to be in retirement?  How do you want to enjoy yourself?  There is no magical age for retirement these days.  You hear of individuals retiring not only in their 60’s or 70’s, but in their 40’s if they have been successful.  But, what is realistic for you?  In the meantime, you can always start planning (and in ways that are not entirely financially related).

Some things to think about in creating a new YOU:

• Take some time and think about what you would like to use the time to enjoy – travel, spend more time with family, start a new career, become more active, volunteer, pursue a new or favorite hobby?  Make notes of your intentions and wishes.
• Don’t be afraid to dream.  After all, dreams can become realities.  Would you like to relocate to be in a warmer climate, closer to family, live in the mountains, live near water?  Is there a favorite travel spot you have visited where you think you might like to live? 
• Consider ways to stay socially active (even in COVID times, you can have social interactions).  Would you like to meet existing friends for a specific purpose or would you like to meet new people by joining a new activity?  How can/will you accomplish this?
• Don’t ignore your health – stay healthy.  How will you accomplish this in retirement?  Plan time for staying active.
• Look at your financial situation and get guidance as to the assets you have accumulated and how they will be impacted in creating the new You.

These tips are meant to start you thinking about what retirement would be like for you – regardless of whether you are retiring in the near future or whether you have several years before retirement.  Often times, people retire without having thought much about it other than “I am ____ years old. It is time for me to retire” or “I have enough assets. I can retire from my career”.  Don’t allow yourself to be one of those people.  Allow yourself some time to dream, to think about what you will do.  It will make for happier times when retirement happens.

And finally, think about your estate planning.  Many times people have not completed their estate planning prior to retirement, thinking that there is no need to do so beforehand.  There could be no falser thoughts.  Estate planning addresses how to or who will handle situations during your lifetime, as well as planning for who will benefit from your estate.  Doing your estate planning is not just for post-death purposes, but living purposes as well.  Consider having your estate planning completed as a gift of love to your loved ones to help them avoid having to make decisions they otherwise would not have been faced with had you completed your estate planning. 

Happy Retirement Planning.

You see your parents aging and you begin to become concerned about their finances.  They may not have shared much with you about their finances or you may be fortunate that they have been open with regard to what they have accumulated.  Regardless of which scenario is true for you, talking about finances can be a delicate conversation.  If both of your parents are alive, this may be more appropriate guidance whereas if one parent is deceased, the survivor may have shared more of this type of information with you. 

How do you start the conversation?  The icebreaker could be to mention to your parent(s) that you are doing your estate planning or were talking to your financial advisor or accountant.  Do they have their affairs in order?  When was the last time their planning was updated? 

Many times, parents who are comfortable with their financial situation – they have income and assets to maintain the lifestyle to which they are accustomed – have their planning in order. You could engage in a conversation as to what their beliefs are for handling finances.   Asking for their advice can change whether they feel threatened with the conversation or whether they feel good to be giving parental advice. 

If your parents have been living from SS check to SS check and you suspect they might be in debt, they may be too embarrassed to tell you.  They may not want to burden you; they could be ashamed of their situation; they may have forgotten about having assets they don’t access to on a regular basis.  Whatever the situation, it is not something to be ignored.  You don’t want your parents to be bothered by collection agencies or creditors; you wouldn’t want them to perhaps lose their residence; you want to see them enjoy their golden years with as little stress as possible.  If you think that they have credit issues, find a way to help them – could the children help with their bills? Should a credit counselor be engaged? Should an investigation be made to see where their assets have gone?  Reach out to your team of professionals to get guidance on what to do.  If your parents die with debts, their estate becomes obligated to pay before assets are distributed to the beneficiaries.  If there are fewer assets than debts, there may be insolvency proceedings required for the estate.  Do what you can to avoid this situation. 

If your parents are ill, you cannot take a soft approach.  You need to step in and make certain that their affairs are in order.  Do they have a living will or health care directive?  Do they have sufficient assets to cover nursing care in or out of a facility?  Might you need to consider making alternative arrangements for your parents to live with another family member?  Often times, we find that when a parent becomes ill, it is the first time that the family gets involved in looking at these matters.  And, it is not an option. It has to be done and NOW.  Avoid that situation. 

These conversations are best had in person, but that may not be possible.  Is it a conversation to be had with one child and parents or with all children present with parents?  That is a decision that only you can make.  You know your parents best, but whatever you do, don’t approach the conversation in a threatening tone.  That could only put them on the defensive and make it more difficult. 

Information that is helpful for you to know is the identity of their attorney, their accountant, their financial advisor.  This is their team who can best piece together their financial situation and planning needs.  Working with one without the others can lead to gaps in the planning. If your parents are computer friendly, do they have passwords written down where you could locate the same?  Where do they keep their original documents? 

Some useful tips to make things easier for everyone is to analyze if financial accounts might be able to be consolidated.  Suggest that they create a “911” or “ICE” (in case of emergency) file to make locating important information easier. 

Good Luck.  This is not an easy conversation to have.

Your dream – to own a home in the mountains or a home at the shore.  Unless you live in New Jersey and have a home at the shore or live in Pennsylvania and have a home in the mountains, your estate could be subject to estate administration in the state where your second home is located.  Many people from Pennsylvania and New York enjoy a home at the Jersey shore.  Many people from New Jersey enjoy a home in the Pennsylvania Mountains. 

Also, in today’s world of online banking, where the financial institution does not have a brick and mortar location in your state, the account you have could be subject to what is called ancillary administration – administration in a state other than that of your primary residence. 

Ancillary administration is required to show that there is an estate administration in the home state of residence. It can be as simple as filing a copy of a death certificate when husband and wife own real estate together all the way to the extent of having to go through a long-drawn out process requiring court appearances. 

For example, an online financial institution offered a great interest rate on an account – better than could be found elsewhere.  The owner dies and the estate is administered in New Jersey with the filing of an inheritance tax return and the issuance of a waiver that all inheritance taxes are paid.  The executor presents the waiver to the financial institution located in California.  Rather than getting the proceeds via a signed letter of the executor requesting the account be closed, the executor must go through the ancillary process in California that involves filing of documents referencing assets of the decedent who was a resident of New Jersey, being recognized as the executor of the estate, advertising the estate administration in California newspapers, and being present for a couple of court hearings – fortunately via telephone.  So, in the end, was that great interest rate that great?

Know what could be required if you own assets in another state.  The above scenario could be experienced, the need to file additional documents could be experienced, there could be inheritance tax due (such as if a New Jersey resident owned real estate in Pennsylvania which passes to children – no New Jersey inheritance tax, but there would be inheritance tax on the real estate in Pennsylvania). 

I am not advising that you not own assets in other states, but just be aware.  Speaking with your estate planning attorney may open up some ideas as to how ancillary administration may be able to be avoided, but if you don’t ask, you will never know what options are available to you. 

OK, so I know that isn’t grammatically correct, but it did get your attention, didn’t it?

We completed our series of blogs on funeral planning, which you may have found interesting, boring or depressing.  My goal was not to put you into more of the funk that we have been experiencing, but to provide some tips that you find helpful. 

We have all experienced the most challenging of times for most of us.  Yes, there are people who were born when the world experienced the Spanish flu a hundred years ago, but they most likely don’t remember it.  But, stop and think of what we have experienced with technology available to us versus what life must have been like without technology.  Hard to imagine, isn’t it? 

Well, we must be thankful to be where we are today and to want to make the most of life.  We have to appreciate what life has to offer and deal with the challenges we are presented with.  If we allow ourselves to get caught up in doom and gloom, we aren’t living to our fullest potential.  Life is short – let’s make the most of it. 

Estate planning is a topic that can cause us to think about our mortality.  And, why should you think about such a morbid topic?  Well, the answer is to free you.  You can derive psychological satisfaction from the exercise.  It can provide you with the peace of mind with regard to the inevitable physical event when it occurs — knowing that we have planned for that moment, to benefit our loved ones or favorite charities, by addressing and planning for the tensions that may be within the family, to help you become more financially secure, to enjoy life and to possibly save taxes. 

You may not think that there is anything to be had in a psychological sense from estate planning and being able to live when you are planning for the inevitable.  But, it really can be an emotional and uplifting experience – just having your affairs in order and not have them constantly nagging on your mind.  Estate planning puts you in control.  It gives you the peace of mind that you know you have done as much for those you love as you possibly can and leaving that legacy is, in essence, a self-survival beyond death.  And that, in and of itself, can be satisfying and calming. 

Ask yourself if you are depleting your energy by worrying about death and the consequences, or if you are really able to enjoy life to its fullest because you aren’t worrying.  Don’t regret getting to the end of your life without really having lived. 

Do something to help yourself and talk to an estate planner.  Perhaps you already have estate planning in place.  If your planning is more than a couple of years old, you may need to update your planning.  Things change, people change, life changes.  You should make certain that your planning meets your needs TODAY, not yesterday.  If you have never completed the estate planning process, you should think about it.  Trust me, it isn’t painful.  Yes, you may need to take a hard look at some things that you may have been pushing off to the sidelines.  But, in the end, it will be a freeing feeling to know that you have done what was needed. 

A good estate planner will ask you a lot of questions.  Don’t be intimidated.  In order for them to do the best planning on your behalf, they need to see the full picture, not just a corner or small piece.  If the planner doesn’t ask a lot of questions, you may need to find one who does.  Don’t feel that they are nosey. They are looking for information on how to best help you.  And, who knows, when they hear of a situation you may be experiencing, they may even have some suggestions on how to deal with that exact situation that has been draining you of energy! 

After all, you gotta keep goin’!

This is Part 3 of my series on Funerals, a subject we don’t like or want to think about.  But, a very important one.

PART 3 – FUNERAL RELATED FEES

Funeral costs include basic services fee for the funeral director and staff, charges for other services and merchandise, and cash advances.

Funeral Fees

The Funeral Rule allows funeral providers to charge a basic services fee that include services common to all funerals, regardless of the specific arrangement. These include funeral planning, securing the necessary permits and copies of death certificates, preparing the notices, sheltering the remains, and coordinating the arrangements with the cemetery, crematory or other third parties. The fee does not include charges for optional services or merchandise.

Charges for other services and merchandise, include costs for optional goods and services such as transporting the remains; embalming and other preparation; use of the funeral home for the viewing, ceremony or memorial service; use of equipment and staff for a graveside service; use of a hearse or limousine; a casket, outer burial container or alternate container; and cremation or interment.

Cash advances are fees charged by the funeral home for goods and services it buys from outside vendors on your behalf, including flowers, obituary notices, pallbearers, officiating clergy, and organists and soloists. Some funeral providers charge you their cost for the items they buy on your behalf. Others add a service fee to the cost. The Funeral Rule requires those who charge an extra fee to disclose that fact in writing, although it doesn’t require them to specify the amount of their markup. The Rule also requires funeral providers to tell you if there are refunds, discounts, or rebates from the supplier on any cash advance item.

Calculating the Actual Cost of a Funeral

As stated earlier, the funeral provider must give you an itemized statement of the total cost of the funeral goods and services you have selected when you are making the arrangements. If the funeral provider doesn’t know the cost of the cash advance items at the time, a written “good faith estimate” is required. This statement also must disclose any legal cemetery or crematory requirements that you purchase specific funeral goods or services.  Here is a list of services and products which may be included in the cost of a funeral:

• EMBALMING – Many funeral homes require embalming if you’re planning a viewing or visitation. But embalming generally is not necessary or legally required if the body is buried or cremated shortly after death. Embalming is a large expense. Under the Funeral Rule, a funeral provider must obtain permission to embalm a deceased person cannot falsely state the embalming is required by law and must disclose that is it not required by law but for certain circumstances, must disclose in writing that you have the right to choose direct cremation or immediate burial which do not require embalming and must disclose when embalming is a practical necessity and if so, a required purchase.
• CASKETS are often the most expensive item you will buy if you plan a traditional service.  Caskets come in a variety of styles and prices and are primarily sold for their look.  Typically, they’re constructed of metal, wood, fiberboard, fiberglass or plastic. An average casket costs a few thousand dollars while some mahogany, bronze or copper caskets can sell for $10,000 or more.

Part 4 will provide more information on burial vessels and their differences. 

We are taking a break this week from our blogs about funeral planning to share some important news about estate planning document executions in the midst of our current COVID-19 situation.  The series on funerals will resume next week.      

Has the pandemic and its effects in the recent months caused you to think about your estate planning and some changes that you may be contemplating?  This pandemic has forced us to think about things we probably would not be thinking about otherwise.  But, as you mull those changes you might be wanting to make, you wonder about the logistics of how to make those changes, particularly with regard to the signing of new documents. 

In our “normal” world, the signing of estate planning documents require that they be signed in the presence of two witnesses and a notary.  In our current world of social distancing, this protocol has been relaxed somewhat and there are now options available for remote signings.  The requirements for remote signings vary from state to state but New Jersey has a protocol in place that allow for signings such as seeing a client sign through a glass window, the attorney visiting the doorway to a client’s home by placing the documents on a tray table in the doorway for signing, doing a “drive by” signing which is done with the person signing documents remaining in their car and the witnesses and notary observing from outside the vehicle, and the use of remote electronic meetings where the witnesses and notary are not necessarily anywhere near the person signing documents.  This has definitely been a time to get creative and yet be able to accomplish important matters which in the past were taken somewhat for granted. 

So, if you have been wanting to make changes to your estate planning but have felt that now is not the time, NOW really is the time to give your attorney a call to make those changes.  Putting off the changes only adds to the burdens of we are facing daily.  Lift those burdens by taking the steps to make changes to your estate plan and put your mind at ease. It can be done and is much simpler than you might think.

Stay safe, stay healthy.

This is Part 2 of my series on Funerals, a subject we don’t like or want to think about.  But, a very important one.

PART 2 – The FTC Funeral Rule

The Funeral Rule, enforced by the Federal Trade Commission (FTC), makes it possible for you to choose only those goods and services you want or need and to pay only for those you select, whether you are making arrangements when a death occurs or in advance. The Rule allows you to compare prices among funeral homes, and makes it possible for you to select the funeral arrangements you want at the home you use.

Rights Under the Funeral Rule

The Funeral Rule gives you the right to:

• Buy only the funeral arrangements you want. You have the right to buy separate goods (such as caskets) and services (such as embalming or a memorial service).
• You can get price information on the telephone. Funeral directors must give you price information on the telephone if you ask for it. You don’t have to give them your name, address, or telephone number first.
• You should get a written, itemized price list when you visit a funeral home. The funeral home must give you a General Price List (GPL) that is yours to keep. It lists all the items and services the home offers and the cost of each one.
• See a written casket price list before you see the actual caskets. There are times when casket prices are included on the funeral home’s GPL. However, it is usually provided on a separate casket price list. Get the price information before you see the caskets so that you can ask about lower-priced products that may not be on display.
• See a written outer burial container price list. Outer burial containers are not required by state law anywhere in the U.S. Many cemeteries require them to prevent the grave from caving in. These containers or vaults are usually sold by the funeral home.  If the prices are not included on the GPL, you have the right to look at a separate price list.
• Receive a written statement on the arrangements selected before you pay. It should show exactly what you are buying and the cost of each item. The funeral home must give you a statement listing every good and service you have selected, the price of each, and the total cost immediately after you make the arrangements.
• Get an explanation in the written statement from the funeral home that describes any legal cemetery or crematory requirement that requires you to buy any funeral goods or services.
• Use an “alternative container” instead of a casket for cremation. No state or local law requires the use of a casket for cremation. A funeral home that offers cremations must tell you that alternative containers are available and must make them available. There are many options available and can be purchased on the internet.  The funeral provider cannot refuse to handle a casket or urn you bought elsewhere — or charge you a fee to use it.
• Make funeral arrangements without embalming. No state law requires routine embalming for every death. Some states require embalming or refrigeration if the body is not buried or cremated within a certain time; some states don’t require it at all. In most cases, refrigeration is an acceptable alternative. In addition, you may choose services like direct cremation and immediate burial, which don’t require any form of preservation. Many funeral homes have a policy requiring embalming if the body is to be publicly viewed, but this is not required by law in most states. Ask if the funeral home offers private family viewing without embalming. If some form of preservation is a practical necessity, ask the funeral home if refrigeration is available.

Part 3 will address fees that will be incurred for funeral services.

With what the world has been experiencing in the past several months, many people were not prepared for the loss of loved ones.  It is a traumatic time and one that we would rather not think about.  However, it is a fact of life that most of us will at some point in our lives be forced to visit a funeral home to arrange for the funeral of a loved one.  This series of articles will hopefully provide some insight as to what may be faced when this unfortunate time arrives. 

This may sound like a very morbid topic, but it is one to be familiar with.  Often times someone who has just lost a loved one shares their experience in planning the funeral of their loved one.  When a loved one dies, grieving family members and friends often are confronted with dozens of decisions about the funeral — all of which must be made quickly and often under great emotional duress. What kind of funeral should it be? What funeral provider should you use? Should you bury or cremate the body, or donate it to science? What are you legally required to buy? What about the availability of environmentally friendly or “green” burials? What other arrangements should you plan? And, practically, how much is it all going to cost?

While you may be healthy and “young” and not feel the need to do any advance planning, you are able to pre-arrange your own funeral at any time and save your loved ones the burden when in a time of emotional distress.  Many funeral homes offer you the option of planning and paying now or paying later.  If you make payment in advance, the funds are placed into a pooled fund and earn interest while they are being held.  At the time the funds are needed, the funeral director then can access the funds to pay for services. 

Funeral Planning Tips

Many funeral providers offer various “packages” of goods and services for different kinds of funerals. When you arrange for a funeral, you have the right to buy goods and services separately. That is, you do not have to accept a package that may include items you do not want. Here are some tips to help you shop for funeral services:

• Shop around in advance. Compare prices from at least two funeral homes. Remember that you can supply your own casket or urn.
• Ask for a price list. The law requires funeral homes to give you written price lists for products and services.
• Resist pressure to buy goods and services you don’t really want or need.
• Recognize your rights. Laws regarding funerals and burials vary from state to state. It’s a smart move to know which goods or services the law requires you to purchase and which are optional.
• Apply the same smart shopping techniques you use for other major purchases. You can cut costs by limiting the viewing to one day or one hour before the funeral, and by dressing your loved one in a favorite outfit instead of costly burial clothing.

My next writing will address Funerals and the Federal Trade Commission.

The “CARES” Act (Coronavirus Aid, Relief, and Economic Security Act) was signed into law on March 27, 2020.  While the 880-page law covers many different areas, we will look at only the section dealing with retirement plan required minimum distributions. 

With the SECURE Act, the beginning age for RMDs (required minimum distributions) was raised to 72 years and caps the distribution period at 10 years.  So, please don’t confuse the SECURE and CARES.  The SECURE Act sets a new precedent that is permanent.  The CARES Act is for the year 2020 only. 

If you have begun to take RMDs from your retirement plan, the CARES Act suspends distributions for almost all plans for 2020 for employees, IRA owners or beneficiaries.  If you are an employee or an IRA owner and have received a distribution for 2020, you may be able to roll those distributions into an IRA.  However, if you are receiving distributions as a beneficiary, this option is not available to you.

If you have a Required Beginning Date (RBD) in 2020 for a retirement plan, any RMDs will be able to be suspended in 2020.  It is advisable to check with the plan administrator or financial institution to confirm that your RBD would qualify for postponement. 

Just as there are many remaining questions about the SECURE Act, there are many questions about the CARES Act.  Speak with your financial advisor or plan administrator if you feel you would want to suspend any retirement distributions in 2020.