Can I Draft My Own Will?

A common question among people is “Can I write my own will?” or “Do I really need a lawyer to do my estate planning?”

The Frisky‘s recent article, “Why You Should Hire A Lawyer to Write Your Estate Plan,” says that writing your own estate plan can be a complicated thing—and one that a non-attorney may find very difficult.

It’s More Than a Will. Many people believe that a will and an estate plan are the same. This is not true. An estate plan is a legal strategy that prepares you for potential incapacity and eventual death. A will is a legal document that’s part of the estate plan.

Money, Time and Energy Savings. Creating your own estate plan will be more time-consuming than you may have thought. Hiring a lawyer to do this will cost you—but it will cost you more, if you decide to do it on your own. Hiring a lawyer for your estate plan will save you time, because he or she is trained in the law to do it the right way.

If you do finish your own estate plan and you realize that it really is a mess, you can hire a lawyer to do it over for you. However, calculate how much time, energy, and resources you’ve spent on making on your quick DIY estate plan. Work with an experienced estate planning attorney and create a sound estate plan.

It’s Complicated. If you don’t fully understand what you’re doing, estate planning can drive you nuts. That’s because every word you write is crucial. Everything you write counts and may be interpreted differently. The law in this area also changes all the time. Agencies in the federal government, the IRS and the courts are always creating new regulations and decisions. Your estate planning attorney monitors all of this, makes sure your estate plan is in compliance and takes the best advantage of the current law.

Objectivity. Another thing your attorney adds to the mix—in addition to legal expertise—is objectivity. Your estate planning attorney will give you a clean, unbiased view of your current situation, along with a fair and honest assessment of your options.

Reference: The Frisky (February 6, 2019) “Why You Should Hire A Lawyer to Write Your Estate Plan”

Suggested Key Terms: Estate Planning Lawyer, Wills, Probate Court, Inheritance

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Why is This the Golden Age of Tax-Free Gift Giving?

There’s a time limit on this opportunity for tax-free giving. It expires after tax year 2025 (unless Congress alters the expiration date). The sooner you exploit this, the more you can give—plus, the more you give away, the smaller your estate gets. It means there is less chance that your estate will have to write a check to the IRS.

The Street’s recent article, “This Is the Golden Age of Tax-Free Gift Giving,” says the federal government has taxed estates since 1924, and as recently as 2001, the threshold when taxes kicked in was $675,000. This exemption level from taxation has been increased ever since. However, a big increase came from the Tax Cuts and Jobs Act, which took effect in 2018. The Act doubled the exemption level and indexed it to inflation. Anything above the new limits is taxed at 40%. It’s $11.4 million for singles and $22.8 million for married couples in 2019.

Although the exemption for estates is sky-high for now, it never hurts to reduce your estate with gifts to your loved ones. While this is nice for them, it’s also good just-in-case planning. If you were to die in 2026, just after President Elizabeth Warren lowers the exemption to $100,000, your heirs would be pretty upset and would see some hefty estate taxes. However, right now, a spouse can get the entire estate tax-free, regardless of its size. Inheritances are also generally not taxable income for beneficiaries. There’s also the portability of the exemption level between spouses.

As far as the “annual exclusion,” the tax-free gift you can give amounts to $15,000. While you can’t carry over an unused portion to the next year, there is a multiplier effect for couples with several beneficiaries. For example, both spouses could each give the maximum to a child, or $30,000 total. In addition, they could then do the same thing for the child’s own spouse, for another $30,000.

A smart gifting strategy is to place the gift in a trust, so the funds are protected from the beneficiary’s creditors (even a former spouse). The givers can also maintain some control over the uses of the money.

For the very generous, the donor could put the proceeds into a “donor” trust (also known as a “grantor” trust), where he or she is responsible for any taxes on income that the gift generates.

However you look at it, right now is the golden age of estate planning and gift giving. Talk with your estate planning attorney to learn how you can make the most of it for your family.

Reference: The Street (February 7, 2019) “This Is the Golden Age of Tax-Free Gift Giving”

Suggested Key Terms: Estate Planning, Donor Trust, Grantor Trust, Asset Protection, Tax Planning, Financial Planning, Probate Attorney, Estate Tax, Gift Tax, Charitable Donation, Unified Federal Estate & Gift Tax Exemption

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The Dark Side of Reverse Mortgages for Seniors

It sounds great, even if you know that the reverse mortgages are known to be a little on the pricey side. However, unexpected circumstances can make this last-chance-to-save-your-retirement strategy backfire in a big way. Just ask Evelyn Boice, who is still wearing the same clothing that she brought to babysit her grandchildren last February. The Union Leader shares her story in the article “Silver Linings: Reverse mortgages for seniors–Lifestyle Maintenance or money pit?”

It seems that a flood at Evelyn’s retirement home caused by burst pipes led to a financial disaster. She’s 83 and didn’t expect to spend her last years living in an apartment attached to her daughter’s home. She’s got a chair, a TV, a bed and a kitchen stool. Everything she owned was destroyed in the flood.

She does have a lot of notebooks—stacks of confusing and incomplete financial statements loaded with indecipherable charges, including a $35 charge every time she calls the reverse mortgage company for help. She’s got threatening letters about being in default, while she waits for the mortgage lender to release an insurance check for $48,651 that she would use to salvage what’s left of her home.

When she called the insurance company, she heard an awful comment from someone at the office: “Why doesn’t she just hurry up and die?”

Boice took out a reverse mortgage in 2007 and used $50,000 of a $200,000 loan to make emergency repairs after Hurricane Wilma struck her home, blowing out windows and doors. However, the danger comes, when homeowners don’t have enough money to live on and maintain their homes, make essential repairs or pay for insurance and property taxes. That’s non-negotiable with a reverse mortgage. Any kind of default can lead to a cascade of new expenses for appraisals, property inspections and legal work to protect the lender. The lender has all the power and all the fine print.

Her case is an extreme example of what can go wrong. In 12 years, an unbelievable amount of paperwork has accumulated. One document shows that she owes $265,000, a number that keeps increasing. The monthly interest charges range from $100 to more than $1,000, and lump sums of more than $2,500, reflecting property taxes.

Boice is getting some help from the Claremont office of New Hampshire Legal Assistance. They are helping her work through the issue, but it may only come in the form of tax deferment or reductions.

Before taking out a reverse mortgage, seniors should look at all available options. They should also have an attorney review the contract from the reverse mortgage company. One small mistake can end up costing hundreds of thousands of dollars.

Reference: Union Leader (Feb. 2, 2019) “Silver Linings: Reverse mortgages for seniors–Lifestyle Maintenance or money pit?”

Suggested Key Terms: Reverse Mortgages, Seniors, Interest Rates, Fine Print, Home Equity Conversion Mortgages, HECMs

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Three Factors to Consider, When Deciding When to Claim Social Security Benefits

There’s an eight year window to file for Social Security, starting when you celebrate your 62nd birthday and ending when you celebrate your 70th birthday, says the Independent Record in a useful article titled “These 3 Factors Should Influence When You File for Social Security.” You can file early, but that puts a dent in the size of your benefits. Wait until 70, and your benefits will hit their highest level.

What’s in the middle of 62 and 70? Full Retirement Age (FRA), which is the age at which you’re entitled to receive the full monthly benefit, based on your earnings history. That age depends upon what year you were born.

What usually happens, is that people start taking their benefits early. For every month ahead of your FRA that you take benefits, your monthly benefit will shrink. Claim at age 62 when your FRA is 67, and you’ll take a 30% hit. However, if you can wait, you’ll receive “delayed retirement credits” that increase benefits by 8% up to age 70. By waiting, you can boost your Social Security benefits by 24%.

Keep these factors in mind, when deciding when to claim your benefits:

Your earnings. You can keep working and receive Social Security benefits. However, unless you’ve reached FRA, doing this will cut your benefits in not one, but two ways. First, you’ll get a reduction because you filed before your FRA. Next, if your earnings exceed a certain level, a portion of your benefits will be withheld. However, it’s not permanent because they’ll be added back into your monthly payments, once you reach FRA. That is if you earn more than $17,640. If you reach FRA later in the year, that earnings limit can go as high as $46,920. If you can wait, it may be best to keep getting your paycheck and letting those benefits grow.

Your savings. Social Security was never intended to be a middle-class retirement plan. It was originally designed to protect the most vulnerable Americans — those who were infirm or elderly — from dire poverty. However, as a nation, we’re not great at saving for retirement. Therefore, Social Security plays a big part in most people’s retirement income. The more you’re going to depend on Social Security to fund your retirement, the longer you should wait to file for benefits.

Your health. This is the great unknown. We simply can’t know how long we are going to live, whether our health is good or bad. Social Security is designed to pay the same total lifetime benefit, regardless of when you file. Say that your FRA is 67, but you file at age 62. You are reducing your monthly benefits by 30%, but you’re collecting 60 more benefit payments during your life. The catch is, you need to live an average life for the formula to work. If you die earlier, you’ve lost money by waiting to file. If you pass away later than the average senior, then you’ll have maxed out your Social Security benefits.

Evaluate all three of these factors to the best of your ability. You should also consider your lifestyle and spending habits. There is no one right answer. However, making the right choice could have a significant impact.

Reference: Independent Record (Feb. 2, 2019) “These 3 Factors Should Influence When You File for Social Security”

Suggested Key Terms: Social Security Benefits, Retirement Income, Full Retirement Age

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Bored in Retirement? Find Your Essential Self, For Starters

More than a few people enjoy their first few months of retirement and then find themselves unbelievably bored. With no daily routine and no purpose, they find the dramatic shift from “labor-to-leisure” tiresome, as reported in the article “How to Avoid Becoming a ‘Bored Boomer’ in Retirement” from Next Avenue. The traditional idea of retirement as a time to do very little, when you are still mentally and physically capable of doing anything, is being challenged by a generation that has so far changed every stage of living.

A study from the Federal Reserve in 2016 found that a third of retirees eventually consider retirement and return to work, some on a full-time and others on a part-time basis. Another study from the Rand Corporation, found that 39% of workers 65 or older who were employed had tried retirement, but didn’t care for it and decided to go back to work.

What’s behind this trend? Some of it has to do with a focus on the financial side of retirement, leaving out the planning for what life in retirement will look like. It turns out that the “soft-side” of retirement requires just as much planning as the money part.

Here’s the sad thing: the first part of retirement is usually when people are at their physical and mental best. Spending five to 10 years figuring out the mental, physical, social and spiritual challenges of retirement that could have been discussed, explored, and planned while still working, is too much time to lose at this later stage of life.

Some key issues:

  • A loss of identity, if what you do has always been who you are.
  • Spouses who find themselves wanting to pursue completely different agendas.
  • Boredom because of lack of social engagement.
  • Depression and physical deterioration, because of reduced activity and no sense of purpose.

How to undo the “bored boomer” syndrome?

Find your “essential self.” What did you love when you were 6, 8 or 10 years old? What did you want to do, before parents, schools and financial obligations got in the way? Bored boomers can redefine who they are and what their greater purpose is. What is your essential self? What are you passionate about? What skills can you use to bring about greater good?

Reintegrate yourself. You have decades of experience, skills, insight and knowledge. What could your second career do to combine all of this with your essential self?

Start a lifestyle business. What does that mean? A lifestyle business is a business that gives you a level of income, freedom to work when and where you want and is not set in any physical location. That includes coaching and consulting, services like web design or graphic services, freelancing sales in your prior industry, etc.

Retirement hasn’t been about playing shuffleboard and taking naps for a while. However, expect it to change even more in the coming decades, as boomers transform this next phase of their lives.

Reference: Next Avenue (Feb. 5, 2019) “How to Avoid Becoming a ‘Bored Boomer’ in Retirement”

Suggested Key Terms: Baby Boomers, Retirement, Social Engagement, Second Career

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What Seniors Need to Know About Annuities

An annuity will pay income to you for the rest of your life. However, if you are considering buying an annuity, you need to understand what you are getting yourself into, before you hand over your life savings. Companies that sell annuities would go out of business, if they did not hedge their bets.  This means that you might receive a better return on your money elsewhere, but possibly with greater risk.

We understand that many seniors worry about outliving their money, and the peace of mind of guaranteed income for life might be worth a lower return. Your happiness and financial security are essential. To help you with your decision, here are some pointers on what seniors need to know about annuities.

There Are No Mulligans

Once you buy an annuity, that money is gone forever. It will not be there, if you have a medical crisis or some other need. You hand over a sizable lump sum. The annuity company gets to invest it, however it sees fit. The company will pay you a fixed monthly amount. It is betting that you will die, before they have to pay out an equivalent return on your money.

When you pass on, the annuity company keeps the money, even though it also enjoyed the income earned from investing it. You will not be able to leave the lump-sum to your heirs.

Experts recommend that if you are set on buying an annuity, that you only put in the minimum amount to cover the difference between your Social Security check and your basic living expenses. You can invest the rest of your money, control it, spend it as you wish and leave any surplus to your loved ones.

The Purpose of an Annuity

Some companies offer annuities as a way to invest now for a payout down the road. Traditional annuities, however, start paying you regular income right away.

Financial planners recommend that if you want to invest your money to use down the road, there are better ways to do this without forking over so much money to an annuity company. If you want to create guaranteed monthly income and you are about to retire, a single-premium immediate annuity might serve your needs.

Resist Sellers Without the Highest Credit Rating

Although it might promise generous monthly income payments to you, if you hand over your savings to a company that goes out of business in a few years, you have lost all of that money. Compare quotes from the annuity insurers with the highest ratings. You can check quotes and ratings online.

Make sure that you understand all the fees and surrender charges or penalties you will have to pay, if you absolutely have to get back some of your money for a significant emergency. Find out if your heirs will get any payout, if you pass on during the first 10 or 15 years of the annuity payments. You should also lock down in writing all terms, like application fees and any other up-front costs.

This article does not offer financial advice. You should talk with your financial advisor before making an investment decision.


AARP. “5 Things You Should Know About Annuities.” (accessed January 25, 2019)

Suggested Key Terms: what seniors need to know about annuities, what you should know before buying an annuity

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Why Is It A Bad Idea to Take a Loan from My 401(k)?

Generally, it’s a really bad idea to take a loan from your 401(k).

Wealth Advisor’s recent article, “Why You Shouldn’t Take A 401(k) Loan,” lists some of the reasons why.

Many people who borrow from their 401(k)s wind up lowering or completely stopping their contributions, while they’re paying back the loans. This can mean the loss of 401(k) matching contributions, when their contribution rates fall below the maximum matched percentage.

Most people thinking about changing jobs don’t know that their outstanding 401(k) loan balance becomes due, when they leave their employer. Whether a job change is voluntary or involuntary, who among us has the financial resources available to pay back a 401(k) loan right away, if we leave our employer? As a result, many individual default.

However, the new tax law gives a little cushion, and you have until your tax return due date the next year. Plan balances that leave 401(k) plans due to loan defaults are rarely ever made up. That makes it less likely that loan defaulters will build sufficient retirement savings.

When you take a loan, it becomes one of your investments in your 401(k) plan account. If you were to take a $10,000 loan for five years at a 6% interest rate, that portion of your 401(k) balance will earn a 6% return for five years.

However, if your loan balance had been invested in one of the other investment options in your plan, you may have earned a lot more. Instead, look into taking a home equity loan first, because interest on those loans is tax-deductible.

Easy availability of a 401(k) loan can frequently make a bad financial situation worse. It can push you into bankruptcy and/or resulting in the loss of your home.

It is clear that 401(k) loans can significantly reduce your chances of achieving retirement preparedness.  It is also one of the worst investments you can make in your 401(k) account.

Reference: Wealth Advisor (February 4, 2019) “Why You Shouldn’t Take A 401(k) Loan”

Suggested Key Terms: 401(k), Financial Planning

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This is the Year to Complete Your Estate Plan!

Your estate plan is an essential part of preparing for the future. It can have a dramatic effect on your family’s future financial situation. Estate planning can also have a significant impact on your tax liability immediately. Utah Business’s article, “5 Estate Planning Tips For 2019,” helps us with some tips.

Your Will. If you have a will, you’re ahead of more than half of the people in the U.S. Remember, however, that estate planning isn’t a one-time thing. It’s an ongoing process that requires making sure your plan reflects your current wishes and financial situation. You should review your will at least every few years. However, there are also some life events that should trigger a review, regardless of when the last review occurred. These include marriage, divorce, the birth or adoption of a child or grandchild, an inheritance, a large financial loss and the loss of a spouse.

A Trust. Anyone can create a trust, and it has real estate planning advantages. You can use a trust to pass assets to heirs and other beneficiaries, just like you could with a will. However, assets passed through a trust don’t need to go through probate. Using a trust to transfer assets provides privacy.

The Current Tax Breaks. The 2017 Tax Cuts and Jobs Act gives us some significant tax cuts in 2019, such as a temporary doubled lifetime exclusion for the gift and estate tax, temporary exemptions from the generation-skipping transfer tax, higher annual gift limits and charitable contribution deductions. To see if you can use of any of these tax benefits, speak to an experienced estate planning attorney.

Talk to an Attorney for a Review of Your Estate Plan. It’s important to remember that estate planning is complicated. You should, therefore, develop a comprehensive estate plan with the help of an experienced attorney. Don’t be tempted to use an online legal do-it-yourself service to save a few dollars, because any mistakes you make could have a big impact on you and your family’s financial future.

Every state has its own laws regarding the formalities required to create a valid will. If you fail to follow any of these, a court may declare your will invalid during probate. Your entire estate will then be distributed according to the laws of intestate succession. These laws may not reflect your wishes for the distribution of your estate. Meeting with an attorney will make certain that your estate planning documents are in order. It will also help you to identify your goals and ensure that your assets are protected and transferred in the most efficient way possible.

Reference: Utah Business (February 5, 2019) “5 Estate Planning Tips For 2019”

Suggested Key Terms: Estate Planning Lawyer, Wills, Trusts, Probate Court, Inheritance, Intestacy, Tax Planning

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Being Forward-Thinking About Assisted Living to Avoid a Crisis

We always think there will be time to plan for assisted living, until something happens and then we are facing an emergency. When a loved one is discharged from the hospital and can’t return home, there’s little or no time to find the right place for them to live. As Next Avenue advises in the article “Planning Ahead for Assisted Living,” don’t wait for the emergency.

Many people deal with assisted living this way. Adult children uproot their lives and relocate to be near their aging parents. Spouses feel helpless when their husbands or wives refuse to even consider moving to a facility, yet they are not safe at home.

The senior often pushes back against leaving their home, which is understandable. However, when illness or aging takes a toll, it’s just a matter of time before they understand, usually the hard way.

One woman was the very model of aging-in-place, until turning 85. Then illnesses and a chronic condition started making it hard for her to move around. When she was taken to the hospital, she had to take a clear look at her situation. It was distressing, but she realized she had to make a change.

By 2030, the number of Americans age 65 and older is expected to increase dramatically, and for the first time in our country’s history, the number of older Americans will be higher than the number of children.

We may not know what life has in store for us. However, we can plan ahead.

Some people start looking at CCRCs–Continuing Care Retirement Communities. These are facilities that include independent living, assisted living and nursing home care, all on the same property. Some have secured memory care for those living with dementia.

Research the costs, policies, and programs of the long-term facilities you may be considering. There are different services offered. Assisted living facilities are state-licensed housing communities that offer residents a range of services. They usually do not offer medical care. A skilled nursing facility/nursing home will have medical services.

Services in assisted living communities vary. Some offer meals and help with bathing, dressing and mobility, medication management, education and social activities. They may be large or small, with residential homes, where three or four residents live with a paid caregiver. Those are known as “adult foster homes.” Others are “assisted living homes,” which usually have 10 or so residents. In these facilities, the caretakers don’t live in the house, but 24-hour care is provided.

Here are some questions to ask, when visiting assisted living communities:

  • Is the facility clean? Does it smell?
  • What is the culture and atmosphere of the place?
  • Are the residents and employees smiling, or does everyone look downcast?

It is recommended that people visit the facility several times, at different times, to get a better sense of the facility.  You should also eat in the dining room a few times. Are people friendly? How is the quality of the food? Set up a meeting with the people who run the facility and your family members.

Don’t dismiss the concerns of your loved ones when visiting facilities. They need to be comfortable, and it’s very important for them to have a voice in making this decision.

Reference: Next Avenue (Jan. 21, 2019) “Planning Ahead for Assisted Living”

Suggested Key Terms: Assisted Living Facility, Skilled Nursing, Continuing Care Retirement Communities, CCRC, Residents, Caretakers

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Will Stepmother Take Dad’s Money When He Dies?

Here’s a savvy and responsible stepmother—she called for a meeting with the estate planning attorney. At age 57, married to a 72-year old man with three kids from his first marriage and two kids from their marriage, she wanted to make sure that his wealth didn’t become a source of agitation for the family, when he passed. That, says Forbes, typifies how the “new” American family has changed, in the article “How Long Will Stepmom Live? And Other Vexing Estate Planning Questions for Modern Families.”

The stepmother did not want to be seen as rapacious or coming between the kids and their inheritance.

The solution was as follows: money for the stepmother was left to a marital trust with provisions for her benefit, while the children received accelerated inheritances through a series of Grantor Retained Annuity Trusts (GRATs), a qualified personal residence trust for a vacation compound and annual exclusion gifts.

Here’s another example: a male descendent of a wealthy family acknowledged that he had fathered a child without being married to the child’s mother. He had to seek legal determination to ensure that the child would be cared for.

Welcome to today’s new family. They include three-parent families, artificial reproductive heirs and blended families. These are all hot issues in the world of estate planning and attorneys are now addressing these new dynamics.

There are five basic questions that must be addressed when creating an estate plan today:

Who? Who gets your money and your stuff?

How much? How will it be divided among heirs?

When? Will it be at a specific age, or just when you die?

Outright versus in trust? With a trustee, you name a person who will control your assets.

Who represents you? An agent and a fiduciary, with a power of attorney who acts on your behalf, if you become incapacitated, an executor who is in charge of administering your estate, and a trustee who manages any trusts created.

Modern families don’t want old-school estate planning solutions. They want to know that their estate plan will work for their situation, which may not match the old “Mom, Dad, Brother, Sister, Brother” construct. So, how should you handle the distribution of wealth for non-traditional families? If a child dies, and a live-in partner is rearing the children, should there be money for the children in a trust? What about taking care of the surviving partner, even if they were not married?

What about late-in-life marriages? If there’s a huge gap in years between grandparents and grandchildren, how will family wealth be passed down? Funding 529 trusts is one answer, and trusts are another. If the age gap is so big that grandparents never meet their grandchildren, a statement of intent in documents can be used to convey the goals and wishes the grandparents have for their grandchildren.

Providing for all children equally isn’t always the goal of the modern family. Some might think their ex-spouse will provide for children and leave them fewer assets than they would have, if that were not a factor. However, don’t assume that, even if you can’t have that conversation with your ex. If your intention is to distribute assets in unequal portions, you may save your loved ones a lot of pain and fighting, by either talking with them about it while you are still living or leaving a letter behind explaining your decision-making process.

It’s hard to tell what changes will come to families in the future, but one thing will remain the same: the need for an estate plan, done with the guidance of an experienced estate planning attorney, is essential.

Reference: Forbes (Jan. 29, 2019) “How Long Will Stepmom Live? And Other Vexing Estate Planning Questions for Modern Families”

Suggested Key Terms: Wills, Trusts, Beneficiaries, Marital Trust, Inheritances, Grantor Retained Annuity Trusts, Blended Families, Estate Planning

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