Applying for Social Security benefits is a pretty simple process, according to Investopedia’s recent article, “When To Apply For Social Security Retirement Benefits.” The earliest you can apply is when you are 61 plus nine months, or four months before benefits are scheduled to begin. Your first Social Security payment will occur four months later, which is going to be the month after you celebrate your 62nd birthday. After that, benefit payments arrive after every full month that you are eligible, if you apply as soon as you are eligible.
Gifting strategies are used to minimize the tax burden on estates and preserve assets, since they promote the transfer of wealth across generations. There are five frequently used lifetime gifting strategies outlined in a recent article from Forbes, “5 Lifetime Gift Strategies For You And Your Family To Consider.” For families with significant assets, these need to be discussed with their estate planning attorney to see how they will fit with the family’s overall estate plan.
A grantor retained annuity trust (GRAT) is an irrevocable trust that can be a good choice, if you want to transfer hard-to-value assets. A GRAT also lets you keep your income stream, divide property interests and make discounted gifts to future generations. With a GRAT, the grantor transfers assets to a trust but maintains a right to an annual income stream, or annuity payment, for a specific period of time. The income stream’s value is deducted from the value of the transferred assets when determining the gift’s full taxable value. Anything left in the GRAT after the annuity period expires, is given to the trust’s beneficiaries without any more gift or estate taxes. However, if the grantor dies before the end of the trust term, the whole value of the trust will be included in the taxable estate (like the trust had never been created). Therefore, you can see how important it can be to carefully choose the term of the trust, so the grantor is likely to live beyond its termination.
When Bankrate asked more than 1,000 Americans where they would prefer to invest money—long-term funds that they don’t need for another decade—the response was surprising. Slightly more than thirty percent said they would invest in real estate.
For young people, this preference is especially true. Among millennials (those ages 23 to 38), 36% responded that real estate is the best long-term investment option. Zero-risk cash investments, such as high-yield savings accounts or CDs, was second with 18% of respondents, and the stock market was third, with 16% of respondents.
Making the decision about which family member will take on the responsibility of power of attorney may be a little easier, if you have a clear understanding of what the role entails. Your estate planning attorney has seen every possible family dynamic and will be able to help you work through this decision.
Considerable’s recent article, “How to assign power of attorney without sparking a family feud,” gives us some idea how the power of attorney can work within a family and among siblings.
The option to roll over a 401(k) into an annuity sounds like a good idea to some. However, there are risks to consider. For one thing, many annuities do not allow funds remaining in the account to go to beneficiaries after the owner dies. The money goes to the insurance company. There are also fees that need to be evaluated carefully.
Investopedia’s recent article asks “What Are the Risks of Rolling My 401(k) Into an Annuity?” The article says many insurance companies advertise the tax benefits of annuities, but a traditional 401(k) is already tax sheltered. A delayed rollover could mean more taxes.
Extra Fees. The big benefit of annuities is that they give you guaranteed income. However, there are some important differences between the income generated by fixed compared to variable annuities. Most annuity investments are made by people looking to ensure that they are provided for in later life. However, you’re likely to see some major expenses if you own an annuity, in addition to your capital investment. The types of fees from your insurance company will vary, depending on the type of investment you select.
59 ½ is around the time that people wake up to the idea that hey, they really are getting older. With that realization, they need to embrace the financial benefits of their age and there are more than a few, according to the article “What Should You Do When You Turn 59½?” from Kiplinger. Here are some of the advantages, and also a few to-do items.
Review Your 401(k). At age 59½, you reach the magic age when you can start taking money out of your retirement accounts without penalty. That’s not to say it’s time to drain your accounts, but it does give you more options.
Create a Safety Net. Hopefully you know about the benefits of having an emergency fund. Having a “rainy day” fund, can give you peace of mind.
Most of us think about life insurance as income replacement for a breadwinner’s salary. That is certainly true. However, life insurance doesn’t stop being useful during the later years, says Kiplinger in a recent article, “Don’t Overlook Advantages of Making Insurance Part of Your Retirement Plan.”
The income replacement function doesn’t go away during retirement. It might even be more important.
When a spouse passes away during retirement, the surviving spouse frequently struggles financially. Some living expenses might be less when there’s just one person in a household, but the reduction in costs rarely makes up for the drop in income. One of the two Social Security checks the couple was getting goes away, and a pension payment may also be lost or reduced 50% or 75%. Life insurance can be leveraged to make certain there’s sufficient cash to compensate for that missing income. This lets the surviving spouse maintain his or her standard of living in retirement.
At its essence, a trust is essentially a contract that permits a third party, called the trustee, to hold assets on behalf of a beneficiary. The trustee has a fiduciary duty to the beneficiary, that is, the trustee must put the beneficiary’s needs first. The trust document is drafted to address issues like how and when assets pass to the beneficiaries, what conditions must be met for the beneficiaries to receive assets, etc.
Because trusts usually avoid probate if assets are owned by or aligned with the trust, the beneficiaries can get access to these assets more quickly than they might if the assets were transferred using a will. If it’s an irrevocable trust, it may not be considered part of the taxable estate, which means there will be fewer taxes due at your death.
An article from The University Herald, “The Challenges and Complexities of Estate Planning for Blended Families, ” clarifies some of the major issues that blended families face. When creating or updating an estate plan, the parents need to set emotions aside and focus on their overall goals.
Estate plans should be reviewed and updated, whenever there’s a major life event, like a divorce, marriage or the birth or adoption of a child. If you don’t do this, it can lead to disastrous consequences after your death, such as unintentionally leaving all your assets to an ex-spouse.
If you have children from previous marriages, make sure they inherit the assets you desire after your death. When new spouses are named as sole beneficiaries on retirement accounts, life insurance policies, and other accounts, they aren’t legally required to share any assets with the children. [Read more…]
More often than not, I spend my time caught up in the weeds of estate planning. Much of my writing and speaking about estate planning tends to focus on a specific topic: trusts, wills, asset alignment, etc. However, every once in awhile, I am reminded of the why of it all. At Family Estate Planning Law Group, we constantly return to the concept of “taking care of families”. It is easy to forget what you are actually doing as the mountains of paperwork requiring your signature pile up, as you get into the minutia of it all. However, when one takes a step back and remembers what they are working hard to protect, all of the details suddenly become a lot more clear. There are two big concepts that come into play when it comes to your estate plan: