IRA

7 Questions to Ask In Order to Do Effective IRA Planning

IRA planning can be tricky. In order to make sure you plan as best as you can, you should discuss the following questions with your attorney and other advisors:

1. Will you need the IRA funds during your life? If not, you may want to convert to a Roth or use the RMD’s to purchase life insurance to grow the wealth going to your family.

2. Will your heirs need it shortly after your death? If so, then the stretch out is not relevant.

3. Are you doing any charitable giving? If so, use the IRA to do it, if possible. That way the contribution is tax free.

4. Do you want to protect what you are leaving to family from their future divorces, lawsuits, creditors, poor judgment, wild spending, etc.? If so, you need protective trusts for each of your heirs. An IRA can go to a properly set up trust and still get the “stretch out”.

5. Are you facing estate tax at your death? If so, you need careful planning to avoid a double tax. An IRA subject to both estate tax and income tax can sometimes lose 75% or more to taxes!

6. Are you in a 2nd marriage? His kids and her kids? If so, be careful leaving your IRA to your spouse. You want to balance out your wishes for your kids with your desire to provide for your spouse. You can’t assume you can leave the IRA to your spouse who will later leave it to your kids. First, it may be spent and gone. Second, your spouse has every legal right to change the beneficiary after your death (to his/her own children).

7. Is your IRA (or other tax deferred retirement plan) a large percentage of your total estate? If so, then even more is at risk. You need careful planning, and it’s vitally important you consult with a professional.

Effective IRA planning is very important in effective estate planning. Give us a call today at 217-726-9200 if you have any questions, or check out one of our upcoming workshops to find out more about effective planning.

Take Action Now: Update Your Beneficiary Designations

It is vitally important that you review all your beneficiary designations (life insurance, 401(k)s, etc.) every 2 years, or sooner in cases of births, deaths, marriages, divorce, job changes or retirement. Read on to see real court cases that show why it is so crucial.

We talk about beneficiaries A LOT around here, and the following court cases will show some of the reasons why, but first, let’s review what a beneficiary is and why it’s so important.

There are a few financial planning tools that are not passed down in wills. Things like life insurance and 401(k)s are passed down to whomever you write on the beneficiary designation form when you sign up for them. And sadly, many people NEVER change those names ever again despite the changes in their life circumstances. There are a significant number of people who take the time to care for their loved ones by taking out life insurance policies, but then don’t pay attention to who really owns it or who the beneficiary is. The tragic consequences of this oversight, impact those they love most.

Life is not a fairytale. Things do not automatically work out for the best. The law is the law, and therefore, will not be swayed by what seems reasonable for your family. These two federal cases illustrate that:

In Hearing v. Minnesota Life Insurance Company, a single father named his sister as beneficiary of his life insurance policy so the sister could take care of the daughter. He intended to change the beneficiary to his daughter once she turned 18. But he never got around to it. Sadly, the father died and the sister claimed the life insurance. Despite a handwritten note stating that he wanted his daughter to be the new beneficiary, the court found that the only thing that mattered was the name on the beneficiary designation. The sister, not the daughter, got the $100,000 pay out.

Again, in The Lincoln National Life Insurance Company v. Ruybal case, we have another “sister” situation. A single dad named his sister beneficiary because she was supposed to take care of the kids. Upon death, the decedent’s sister, his executor, and the two daughters all claimed the life insurance. The court ruled in favor of the sister, noting that, “Anyone attacking the right of a named beneficiary to receive the proceeds of an insurance policy has the burden of proving that the beneficiary is not entitled thereto.” In other words, the sister was on the form – plain and simple. Would it have been more fair for the estate or the daughters to get the money from the policy? Probably. But it is not the duty of the courts to do the reasonable thing. It is their duty to uphold and interpret the law. It is your duty to keep up to date with your beneficiary designations.

As you can see in each of these real-live cases, the court ordered payment to the named beneficiary, even to the detriment of the children of the deceased.  The clear message from the courts in these decisions is that the named beneficiary of a life insurance policy will get the death proceeds regardless of what other competing claims exist, or what one’s sense of fairness seems to dictate.

This means the burden is yours to keep up with your beneficiary designations. It is vitally important to make sure they are up to date. At the very least, you should review your beneficiary designations every 2 years. But in the case of the following life events, you should review your beneficiary designations right away:

  • Family events such as births, deaths, marriages and divorces all should trigger a review of ALL beneficiary designations.
  • Work events such as changes in business, change of job or retirement ALL should trigger reviews.
  • External events such as significant tax changes or other legal changes should also trigger a review.

Some mistakes are just not fixable. Please, double check your beneficiary designations if you have not done so recently. Edwards Group clients can rest easy because we help make sure assets are set up properly (and stay that way through our Dynasty Membership program). Join us for an introductory workshop to hear more about how we can help with estate planning.

reverse mortgage

Are Reverse Mortgages EVER Okay?

Reverse mortgages should only be used as a last resort.

You know the old saying, “If it seems to good to be true, then it probably is.” Well, it seems that saying could easily apply to the reverse mortgage industry. Because of that, if you are considering one, you need to proceed with extreme caution.

Being able to borrow against the value of your home can seem like a really good idea at the time, but when it comes time to repay the loan (because that’s what this is after all), it can create real problems for your heirs or even yourself if you end up having to move out of your house unexpectedly.

As chronicled in this article from the New York Times, many lending companies are not behaving on the up and up when it comes to repayment of reverse mortgages. These shady practices create a lot of extra stress (emotional, financial and otherwise) on those left behind. After reading the full article, one has to wonder, “Is a reverse mortgage EVER a good idea?”

They can be. According to the website, eldercarelinkreverse mortgages can be a good idea when:

  • you own your home free and clear or have a low mortgage balance.
  • if you’re over 70.
  • if you need extra money for medical costs or other bills.
  • if you want to use the proceeds to downsize to a smaller home.

But sometimes, reverse mortgages can be a bad idea. This is especially true if:

  • your home lost a lot of equity in the housing downturn.
  • you aren’t that old.
  • the mortgage lender pressures you and also asks you to buy annuities or expensive financial services.
  • you plan to move in a few years.
  • you want to leave the home as an inheritance.

Bottom line from Dave: In most cases reverse mortgages should only be used as a last resort! The costs of these loans make them a very expensive way to get funds. A home equity line of credit should be considered before a reverse mortgage. And you should definitely get advice from an experienced elder law attorney before doing so. It’s possible that other benefits such as VA or Medicaid could be a better option for care than a reverse mortgage.

Updated Dollar Amounts in 2015

Social Security and VA pension numbers will change in 2015, with Medicaid numbers staying the same in Illinois. Here’s what you can expect:

VA Pensions and Social Security will increase by 1.7% in 2015

Effective December 31, 2014 (but not seen in your checks until Feb. 1, 2015) the social security benefit and VA pensions will increase by 1.7%. The new numbers for the VA are as follows:

Veteran – Aid & Attendance – $1788/mo (up from $1759)

Veteran w/1 Dependent – Aid & Attendance – $2120/mo (up from $2085)

Widow – Aid & Attendance – $1149/mo (up from $1130)

Medicaid Restrictions for 2015

The Individual Resource Allowance is $2000

The Community Spouse Resource Allowance is $109,560

The Monthly Maintenance Needs Allowance is $2739

In 2015, if you are in a full time nursing facility and Medicaid is paying for your care, you will still only be allowed to keep $30/mo as an allowance for extras.

Confused?

If none of this makes sense to you, and you have a loved one who is facing long-term care, please give us a call right away. There is help for the skyrocketing costs of long-term care. There are ways to make sure your loved one gets the best care possible, but it takes expert planning, an understanding of the complicated laws and a familiarity with the government systems that need to be navigated. Our team is very experienced with VA and Medicaid applications. We save families tons of time, money and stress everyday by walking them through the process. Tarina would be happy to speak with you about your situation to see what the best first step might be. And you will never be pressured.

How to Avoid an Estate Battle After You’re Gone

Creating a “special stuff list” will go a long way in keeping the peace once you’re gone.

Sadly, in my line of work, I see families fighting much more often than I would like. And while the media might lead you to believe it’s all about the money, oftentimes the fights are about things like Grandma’s curio cabinet full of keepsakes.

When it comes to preventing a big fight after you die, a will just isn’t enough. Even with an effective will, there is plenty of room for disagreement and fighting. Because of this, I encourage clients to create a “special stuff list” that directs certain items to the people they want those items to go to. This list, which is officially called a Memorandum for Distribution of Personal Property, is then incorporated into the Will or Living Trust.

 

Here are 7 things to consider when making your “special stuff list”:

1. What did your parents or grandparents pass down to you that you want to pass on?

2. What items bring back the most memories of your family time?
3. Have you discussed with family what items they might want?
4. How will you preserve the stories behind the items? Write out the story and record a video or audio about it. Even a few short sentences will mean a lot.
5. Don’t rely on Post-it notes, masking tape or just assume, “the kids know who gets what.”
6. Create a special stuff list and make sure it is signed, dated, and copies sent to your attorney and also kept with your Will or Living Trust.
7. In order to better identify items, take photos and include it with your “special stuff list.”
We’ve created a great resource to help you create your “special stuff” list. Download the worksheet by clicking on the button below.

Download Your FREE Resource

A Few More Things to Consider

While creating your list, don’t assume the things you find valuable will be the same things your family finds valuable. It’s always better to communicate about what you want to leave, and to whom, beforehand. Maybe you want your granddaughter to have your birthstone earrings, but maybe she’d rather have that old battered, blue pottery bowl that you used to make pudding in when she visited. You might never know the bowl was meaningful to her without a conversation, and you might even throw it out without any consideration, thinking, “Nobody’ll want this ol’ thing.”

A good resource on the matter is Who Gets Grandma’s Pie Plate, a resource developed by University of Minnesota professor, Marlene Stum. On her website, Stum gives tips about broaching the awkward topic of inheritance. Read Critical Conversations About Inheritance: Can We Talk? here for more. This article, from Consumer Reports, also has some good tips.

Advice for Those Who Haven’t Planned Yet

Michelle and I don’t gamble very often. But when we do, watch out!

A few years go, the kids went to the grandparents’ and we spent the weekend in St. Louis. We were staying near Laclede’s Landing at a new hotel near the Lumiere Place Casino. The evening after we checked in, we headed out to do some serious gambling.

We stopped at the penny slots and started playing. About 10 minutes later, we hit a big jackpot! Being up all of $12, we decided to quit while we were ahead.

Do you enjoy gambling? We find that most of our clients don’t like to roll the dice about their planning. Instead, they want to tie it down so they can have real peace of mind.

Not planning ahead to protect your family and your assets is gambling.

What will happen if you die suddenly? What will happen if you need long term care?

Leaving things to chance is a gamble and the losses can be HUGE.

With good planning, you can have real peace of mind and not gamble that these vitally important things will just work out. By planning ahead, you can avoid these 4 hardships:

1. Stress. You wouldn’t purposefully place extra stress on your spouse or your kids, would you? But a lack of planning on your part can do just that, leaving everyone to wonder, “What should we do? Who do we contact?” Good planning makes it easier on your loved ones by providing a clear plan.

2. Delay. Messy estate plans take longer to wrap up, causing the stress and extra work of an estate to drag on and on. Good planning helps things get wrapped up as quickly as possible.

3. Conflict. Lack of planning can lead to arguments in the family. Arguments between siblings, between step-mom and step-kids, between nieces and nephews. Good planning will make it easy on the family, making less to fight about and less stress that can lead to conflict.

4. Loss of life savings. Lack of planning can result in the loss of your wealth — to the nursing home, to probate expenses, to taxes, to creditors or to wild spending by your heirs. Good planning will protect what you have worked so hard for.

If you’re interested in learning more about effective planning, check out one of our upcoming workshops. They are a free and no pressure way to get started! And, as always, if you have any questions at all or are unsure of what your next step should be, give us a call at 217-726-9200. Tarina would be more than happy to chat with you.

Get comfortable — no high-pressure sales tactics here

I remember a phone call I had with a company who sells software to law firms. Their product seemed like something that might be helpful, and I was interested to learn more. I spent an hour on the phone with this guy and things looked good — until the salesman ruined it.

In the last 5 minutes he got really pushy. I told him to give us a couple weeks to think about how this would fit with our firm and then check back with us. But he wouldn’t let it go. I’m sure he was following some sales training tactics he had been taught. Those tactics completely backfired.

I don’t want to be pushed into something I’m not sure about. I like to have time to think things over before I spend money. And I think most everybody feels that same way.

Nobody wants to be pressured into buying something they don’t really want or need.

And that’s one thing you’ll find about Edwards Group if you get to know us — I’m not a very “good” salesman. And I don’t want to be.

Why?

Because I don’t really want to sell you anything. What I want to do is educate you about the ways we can help your family.

We do things a little differently around here. Not everyone is a good fit to work with our firm. That’s why we focus so much of our attention and effort on making sure you’re educated about your options and the way things work before any payment is ever exchanged.

Because I’m not a good salesman, you don’t have to worry about being put in an uncomfortable situation or being coerced into agreeing to something that isn’t a good fit for your family.

Because I’m not a good salesman, you can be sure that if you decide to work with us, we’ll form a great team who can work together to protect your family.

And because of that, you don’t have to worry about wasting your hard-earned money on a plan that doesn’t fit your family or was designed with another family in mind. Each of our plans are designed in collaboration with you, with the unique needs of your family as the guiding force in the process.

We understand that meeting with a lawyer can be intimidating. That’s another part of the reason we’ve designed our process the way we have. We don’t mind if you take a little time to get to know us first.

Our free, no pressure workshops are a great way to learn more about the planning needs your family may have. They are also a great way to get to know our firm better. If, after attending a workshop, you would like to take the next step, you will receive $200 off your initial meeting fee.

Not ready to talk to a person yet? We have put a lot of our time into developing a website that contains helpful information about all aspects of planning. You’ll find hundreds of articles about estate planning, trusts, Veterans benefits, Medicaid and Medicare on our website. Feel free to use the search button to quickly get to what you need.

No matter what, I hope that you will take the time to learn about ways to protect your family and your assets. The other side of our practice involves helping people who didn’t plan properly clean up the mess that’s left behind. My sincere desire would be for every family to have effective planning strategies in place and for no family to have to experience the effects of bad planning. Take a step in the right direction today by attending a workshop, giving us a call, or signing up for our weekly email newsletter.

Have You Ever Paid Off a Child’s Credit Card?

If you’ve ever had to bail your child out financially, then keep reading.

I have a list that I call the “Dirty Dozen Mistakes of Estate Planning” and #7 on the list is: Thinking your child will start being good with money later if he or she is terrible with money right now.

Inheritances can disappear fast. This is true even when a child is pretty good with their money. But what if you KNOW the child is not wise financially? Maybe you have bailed them out more than once with credit cards, overspending, etc.? You keep telling them to budget and plan ahead, but they don’t.

What will happen when they inherit from you? Do you think they’ll wake up one morning and suddenly be good with money? Don’t kid yourself. People don’t often change how they spend. Your plan needs to take steps to protect the inheritance you leave. If not, it could be gone in a flash.

 

Can your estate plan pass the Down Low test?

What a Child’s Game Can Teach us About Planning…

In our house, the “Down Low, Too Slow” game is very popular. It goes like this:

Give me five (hand slap)

Way up high (another hand slap)

Down low (pull hand away before it can get slapped)

Too slow!!

It always gets a laugh out of the kids. Even after the 10th time in a row!

“Up High, Down Low” is also good estate planning advice. A good plan will include:

  1. NOW – look at your situation, finances, family. What are your goals and risks?
  2. UP HIGH – look at the older generation. When the older generation passes, will they be leaving you an inheritance that could create estate tax problems for you? Will they face nursing home costs that could impact the family? Will their lack of planning give you more stress later or more conflict with other siblings?
  3. DOWN LOW – look at your kids and grandkids. What is their financial situation? How will an inheritance impact them? Will they be ready for it? Will your daughter-in-law spend it all? Will it lead to extra taxes for the kids?

A good estate plan considers those older and younger than you. If you’re not sure about the state of your plan, give us a call at 217-726-9200. We’ll be happy to chat with you.

5 Reasons You Need a Trust

Trusts are a very valuable planning tool. When people think about estate planning, most people think about wills. While wills are the most basic/common tool for estate planning, trusts are an incredibly effective way to plan for things that wills can’t address. Trusts can be used to:

  1. Organize your assets so it’s easier on your family later.
  2. Set out instructions for when you’re not able to make your own decisions — either upon disability (like a stroke) or death.
  3. Keep things private. (All wills are public record.)
  4. Protect assets from creditors, divorces, kids who don’t know how to manage money and even future lawsuits you can’t anticipate (like car accidents).
  5. Reallocate assets to maximize long-term care benefits such as Medicaid or VA benefits.

If you’re ready to get started protecting what you’ve worked so hard for, call us at 217-726-9200 to schedule an initial appointment with one of our attorneys. If you want to learn more without any obligation, our free 1-hour workshop, “Intro to Edwards Group: Will and Trusts Orientation” is a great way to learn about the basics of wills and trusts while finding out why our approach is so unique and effective. After attending the workshop, if you decide to work with us, you’ll receive $200 off your Initial Meeting fee.