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What Can You Expect From the New Tax Law in 2019?

A new year is here, and with it comes a flood of year-end tax documents like W-2s, 1099s and others. Before you know it, the April 15 tax filing deadline will be upon us, and it will be time to submit your return.

It’s always wise to meet with your financial professional at the beginning of the year. It gives you an opportunity to discuss the past year, your goals for the coming year and your tax strategy. However, a consultation with your financial professional could be especially helpful this year.

 

The Tax Cuts and Jobs Act was signed into law in late 2017 by President Trump. While some of its changes went into effect last year, 2018 was the first full calendar year under the new law. The return you file in April will likely be the first that reflects much of the law’s changes. Below are a few of the biggest changes and how they could affect your return:

 

Increased Standard Deduction

 

The new tax law impacted a wide range of credits and deductions, from the deduction of medical expenses to credits for child care. Those who itemize deductions may have felt the brunt of these changes.

 

However, the tax law significantly increased the standard deduction. In 2017 the standard deduction was $6,350 for single filers and $12,700 for married couples. The new law increased those numbers to $12,000 and $24,000, respectively.1

 

Given the changes to itemized deductions and the increased standard deduction, you may want to consult with a financial or tax professional before you file your return. If you’ve traditionally itemized deductions in the past, that may no longer make sense.

 

New Tax Brackets

 

The new tax law also made significant changes to the tax brackets. There are still seven different brackets, just as there were before the passage of the law. And the lowest rate is still 10 percent. The top income tax rate is down to 37 percent, however, from 39.6 percent.2 There are similar cuts throughout the rest of the brackets as well.

 

The law also made changes to the income levels for each bracket. Generally, the bracket levels were increased throughout the tax code, which means you have to earn more before moving into a higher bracket. Under the old tax code, for example, a married couple earning $250,000 would be in the 33 percent bracket. Under the new law, that same couple would be in the 24 percent bracket. A single individual earning $80,000 would be in the 28 percent bracket under the old law but is now in the 22 percent bracket.2

 

Itemized Deduction Changes

 

As mentioned, the new tax law increased the standard deduction amounts. However, those increases came at the expense of many itemized deductions. The new law eliminated or reduced many common deductions, including those for state and local taxes, real estate taxes, mortgage and home equity loan interest, and even fees to accountants and other advisers.

 

However, there could be other opportunities to boost your itemized deductions above the standard deduction level. Charitable donations are still deductible, as are medical expenses assuming they exceed the 7.5 percent threshold. If you’re a business owner, you can deduct many of your expenses, including up to 20 percent of your income assuming you meet earnings thresholds.3

 

Ready to develop your tax strategy? Let’s connect soon and talk about taxes and your entire financial picture. Contact us today at Retirement Peace Project. We can help you analyze your needs and goals and implement a plan.

 

1https://www.nerdwallet.com/blog/taxes/standard-deduction/

2https://www.hrblock.com/tax-center/irs/tax-reform/new-tax-brackets/

3https://money.usnews.com/investing/investing-101/articles/know-these-6-federal-tax-changes-to-avoid-a-surprise-in-2019

 

18326 – 2018/12/26

What is Long-Term Care?

If you’re planning for retirement, you’ve probably heard about long-term care and the need to plan for it. It’s a common need for retirees. In fact, the U.S. Department of Health and Human Services estimates that today’s 65-year-olds have a 70 percent chance of needing long-term care at some point in their lives.1 The average senior will need care for three years.

But what exactly is long-term care? How is it provided? And what kind of health issues cause a need for long-term care? Long-term care is a broad term that applies to a variety of services. It’s difficult to plan for something when you don’t know exactly what it will look like or how much it will cost.

Long-term care is generally defined as extended assistance with basic living activities, like mobility, bathing, eating, household chores and more. It can be provided in the home or in a facility. It’s often caused by cognitive issues like Alzheimer’s but can also be needed as a result of stroke, cancer, heart disease, joint issues and a wide range of other conditions.

You can’t predict what kind of health issues you’ll face in the future, but you can plan for potential costs. Below are three common ways in which long-term care is administered. A financial professional can help you develop a strategy to pay for your future care needs.

 

Family Support

 

For many seniors, long-term care is progressive. It often starts with support for simple tasks like meal preparation, cleaning or running errands. As health issues become more intense, they need more hands-on assistance with things like mobility or bathing.

You may be able to count on a family member or friend for help in the early stages of care. However, family-based care usually doesn’t last forever. At some point, your care needs may progress to a level that is beyond your family’s capability. For instance, you may reach a point where your spouse can no longer transfer you from a bed to a wheelchair. Or you may need round-the-clock support and that may be too much for your family to provide.

While these thoughts aren’t pleasant, they’re a reality for many seniors. According to projections, it’s likely that most seniors will need paid, professional care at some point. Even if your family is able to help, don’t count on that low-cost assistance to meet all your needs.

 

Home Care

 

Even if your needs have progressed beyond what your family can provide, that doesn’t necessarily mean you’ll have to move into a facility. You may be able to stay in your home and get the care you need, especially if you’ve developed a strategy to pay for care.

For example, you could modify your home to accommodate health equipment such as a bed, a wheelchair or even grab bars. You might be able to hire an in-home health aide to provide custodial care and possibly even skilled nursing.

Genworth estimates that a full-time in-home health aide costs an average of $4,195 per month.2 Most long-term care insurance policies cover home care, even if it’s provided by a family member. Many policies also cover home modifications and equipment.

Facility Care

 

The U.S. Department of Health and Human Services estimates that 35 percent of all seniors spend at least a year in a nursing or assisted living facility at some point.1 You may need skilled nursing as the result of a specific injury or illness. Or you may decide to move into an assisted living facility, so you have full-time support available.

Either way, your facility care is likely to be a costly proposition. Genworth estimates that the average room in an assisted living facility cost $4,000 per month in 2018. A room in a nursing home cost more than $7,000.2

It’s possible that these costs will be covered by Medicare or Medicaid, but that’s not usually the case. Medicare only covers skilled nursing that’s related to a specific hospitalization. Even if you qualify for Medicare, the coverage typically lasts only several months. Medicaid only covers nursing home care if you have few assets and little income. You may want to think about alternatives to Medicare, like long-term care insurance, to pay for your stay in a facility.

 

Do you have a strategy to pay for long-term care? If not, let’s talk about it. Contact us today at Retirement Peace Project. We can help you develop a plan. Let’s connect soon and start the conversation.

 

1https://longtermcare.acl.gov/the-basics/how-much-care-will-you-need.html

2https://www.genworth.com/aging-and-you/finances/cost-of-care.html

 

Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.

18148 – 2018/10/17

Retirement Income: How Much Will You Have?

How much income will your assets generate in retirement? Do you know?  If you answered no, you’re not alone. A recent study from the LIMRA Secure Retirement Institute (LIMRA SRI) found that more than half of all workers don’t know how their retirement assets will translate into income.1

Creating a retirement projection can boost your confidence in your strategy and help you identify areas for improvement. According to the LIMRA study, almost 70 percent of the surveyed participants said they were more confident in their ability to retire after estimating their income. Of those who hadn’t estimated their income, only 30 percent were confident.1

You can use a retirement income estimate to gain insight into your planning. You may see that you need to increase your contributions or perhaps make a change to your allocation. Below are a few tips on how to use a retirement income estimate in your planning:

 

Review all your retirement accounts and income sources.

 

Job change is a common occurrence today. Many people change employers or even industries several times in their career. Each time they do, they may leave a 401(k) account behind at their old employer. It’s possible that you have old 401(k) plans and IRAs spread across multiple employers and financial institutions.

 

The first step is to gather information from all your accounts into one view so you can analyze your asset balances. Gather statements from your investment accounts. Contact old employers to get information on old 401(k) balances, deferred compensation and other retirement accounts.

You’ll also want to estimate possible income sources. Social Security’s website can provide an estimate of your future benefit. If you’re fortunate enough to have a pension, contact your human resources department or plan administrator for a benefit estimate.

Once you’ve gathered that information, consolidate it in one report. You may need to work with a financial professional to convert your balance information into an income estimate. However, adding up your total assets and income is a good first step.

 

Project your income.

 

Once you’ve gathered your balance information, the next step is to project your retirement income. With your Social Security income and pension benefit, you may know exactly what the amount will be. It can be more difficult to project income from an investment account because the distributions aren’t guaranteed* or predictable.

A financial professional can run withdrawal simulations for you that can project your retirement income using different variables. For example, your financial professional may be able to use software to model different rates of return and withdrawal amounts to show you what is sustainable in retirement. That could give you more confidence or help you identify areas for adjustment.

 

Create a retirement budget.

 

A budget is always a helpful financial tool, but it’s especially powerful when planning for retirement. You can project your retirement expenses based on your current spending and inflation. You can then compare your estimated spending with your projected retirement income.

If your income exceeds your expenses, you may be on the right track. If there’s a gap, you may need to do more work and consider saving more money to reach your retirement goal.

Again, this is a process in which you may benefit from speaking with a financial professional. They have experience building retirement budgets and can advise you on costs and issues that you may not have anticipated.

 

Ready to estimate your income and boost your retirement confidence? Let’s talk about it. Contact us today at Retirement Peace Project. We can help you analyze your needs and develop a plan. Let’s connect soon and start the conversation.

 

1https://www.limra.com/Posts/PR/Industry_Trends_Blog/More_Than_Half_of_All_U_S__Workers_Have_Difficulty_Understanding_Retirement_Savings_in_Terms_of_Future_Monthly_Income.aspx

 

*Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values.

Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.

18184 – 2018/10/22

3 Ways to Help Your Elderly Parent with Their Long-Term Care Need

It’s a situation every child fear, but one that is a painful reality for many families. A parent, after spending decades raising a family, building a career and maintaining a home, no longer has the physical or mental ability to care for themselves. They either need care and support in their home, or they need to transition into an assisted living facility.

According to the U.S. Department of Health and Human Services, 70 percent of Americans age 65 and older can expect to use long-term care at some point in their lives. On average, they will need care for three years, although 20 percent of retirees will need it for five years or more.1

If you’ve already started exploring your care options, you know how costly these services can be. In some cases, you may be looking at thousands of dollars per month for several years. If your parent doesn’t have significant assets or long-term care insurance, that could be a tough bill to pay.

At the same time, you may be preparing for retirement, or you could be newly retired. You might not have the resources or financial flexibility to shoulder some of the burden. While you may want to help your parent get the care they need, you also don’t want to sabotage your own plans.

Fortunately, you have options available. Below are three sources to explore as you plan your parent’s long-term care:

 

Government Assistance

 

There are a variety of government assistance programs you may want to look into. While Medicare is the most prominent, it often doesn’t cover long-term care costs. The exception is if the long-term care is a direct result of a hospitalization. In that case, Medicare may cover costs temporarily, but it usually isn’t a long-term solution.

Medicaid will cover long-term care almost as long as it is needed. The catch, though, is that your parent will have to be nearly destitute before they’re eligible. To qualify for long-term care, you must have a very low level of cash and few other assets.

Finally, if your parent is a veteran, they may qualify for a program known as Aid & Attendance (A&A) from the U.S. Department of Veterans Affairs (VA). The A&A program is designed to help housebound veterans with their care expenses.

The A&A benefit is paid monthly in addition to any existing military pension. The VA uses a complex formula to arrive at the A&A benefit amount, so you’ll want to consult with the agency for more information.

 

Non-Obvious Assets

 

If your parent needs long-term care, you’ll probably start your planning process by evaluating their bank accounts, pension plans, investment accounts and more. Those are all great resources to consider.

However, there may be other assets that are just as helpful. For example, your parent could have old permanent life insurance policies that have been accumulating cash value in the form of dividends or interest for years or even decades. You could tap into that cash value to pay for care.

Also, look at your parent’s physical assets. It may be difficult to part with a treasured car, art collection or even the family home, but if it gets your parent the care they need, it could be worth it. You could also consider a reverse mortgage to tap into the home’s equity without surrendering the house itself.

 

Family Care Agreements

 

If you have siblings, you may find that the most efficient way to provide your parent with care and support is to handle it within the family. This could be especially true if your parent needs help only with basic activities like cleaning, dressing and bathing, rather than with medical issues.

In some families there’s one sibling who may have the time, temperament and skills to provide such care. Of course, it also may not be fair for that sibling to shoulder the entire burden. In that case, you may wish to create a family care agreement. That’s a document by which the siblings who aren’t providing care contribute compensation to the sibling who is handling the day-to-day care and support.

While it may be uncomfortable for siblings to pay one another, that kind of arrangement could also make it more feasible for your parent to stay in their home and to get care from someone they know, love and trust. If you opt for this strategy, make sure you create a formal, legal document and spell out every detail.

 

Ready to develop a long-term care strategy for your parents and yourself? Let’s talk about it. Contact us today at Retirement Peace Project. We can help your family develop and implement a plan. Let’s connect soon and start the conversation.

 

1http://longtermcare.gov/the-basics/how-much-care-will-you-need/

 

3 Questions to Ask Yourself About Your 401(k) After You Retire?

You’ve probably spent years, even decades, diligently contributing to your 401(k) plan. You’ve taken advantage of employer matching contributions, managed your investments and possibly even made catch-up contributions after age 50. Now retirement is quickly approaching, and you’ve started to wonder what you should do with your 401(k) after you leave the working world.

Many workers view their 401(k) plan as an accumulation vehicle. That’s a correct perspective while you’re working, but after you retire, the 401(k) may be a distribution tool. If you’re like many retirees, you’ll need income from your 401(k) and other investments to fund your lifestyle. The question is how to best utilize your plan to manage those distributions.

You have a few options available. Before you choose the option that’s best for you, though, you should ask yourself some questions about your risks, concerns and goals. Below are a few questions to consider. Your answers should give you guidance on how best to manage your 401(k) plan after retirement.

Should you roll your 401(k) funds into an IRA?

 

There’s nothing saying you have to do anything with your 401(k) funds. In fact, in many cases you can leave your funds in the plan indefinitely even if you are no longer with the employer. If you’re comfortable with the investment options and the plan’s service capabilities, you may wish to stay in the plan.

However, you may find that rolling your 401(k) funds into an IRA is a preferable strategy. With an IRA you can often choose from a wide range of investment options, far beyond what is usually available in a 401(k). An IRA may give you the flexibility and capability to find investments that better align with your risk tolerance and growth needs.

What’s the right allocation for you?

 

When you were working and contributing to your 401(k), you may not have been as sensitive to risk. In retirement, that could change. After all, you will likely be dependent on your retirement distributions to fund your lifestyle to some degree. As you begin to withdraw money, you may become more risk-averse.

The challenge is to find investments that not only limit your downside exposure but also provide growth opportunities. Many investments that have little risk also have little growth potential. That can be an issue, because you will likely need growth to combat inflation and support your withdrawals.

There are some financial tools, such as fixed indexed annuities, that offer protection against loss but also offer upside opportunity. However, those tools often aren’t available in 401(k) plans. To access those tools, you may need to roll your funds into an IRA.

What level of withdrawals should you take?

 

Another important decision point is in what level of withdrawals you should take from your 401(k) funds after you retire. It’s a tricky decision. Take too little, and you may not have enough to support your desired lifestyle. Take too much, and you may drain your 401(k) funds, putting yourself in a challenging position later in retirement.

It’s hard to determine the appropriate withdrawal level without first developing a retirement budget and a projected income plan. Once you understand your expenses and your estimated income, you can then make an accurate and informed decision about potential distributions.

 

If you need help developing a post-retirement strategy for your 401(k), contact us at Retirement Peace Project. We can help you explore your options and make the best possible decisions. Let’s connect soon and start the conversation.

 

Single in Retirement: Tips to Plan for Long-Term Care

Planning for retirement is always a complex process, but it brings unique issues for singles. Married couples often benefit from joint pension payments and dual Social Security income streams, as well as multiple 401(k) accounts and IRAs. Single retirees may find it more challenging to plan for retirement without the benefit of a partner’s income and assets.

Increasing amounts of Americans are single as they enter retirement. That’s especially true for women. According to data from the U.S. Census Bureau, more than half of all women age 65 and older in 2014 were single.1

If you expect to be single in retirement, you may face unique planning challenges and issues. One of the biggest could be the need for long-term care, which is extended assistance with daily living activities such as eating, dressing and bathing. Long-term care is often provided either in a facility or in the home and can cost thousands of dollars per month. According to the U.S. Department of Health and Human Services, 70 percent of retirees will need some form of long-term care.2

Unless you have a strategy in place, long-term care could drain your retirement assets. Below are a few questions you can ask yourself to start planning for long-term care expenses. If you haven’t started planning, now may be the time to do so. It’s never too early to consider the risk and your options.

 

Who can assist you if you need care?

 

Long-term care is often caused by cognitive issues like Alzheimer’s, Parkinson’s or the aftereffects of a stroke. In the beginning stages of these conditions, a spouse may be able to provide much of the necessary support and assistance. That can delay the need for an in-home aide or a move to a facility.

However, single retirees don’t have the benefit of a spouse to help with day-to-day living activities. Consider who could provide assistance if you should develop a cognitive issue. Do you have grown children in the area? What about other relatives, like a sibling or nieces or nephews? Could you rely on friends or neighbors?

Be careful about depending on friends and family for too much help. While they may be willing to pitch in occasionally, you don’t want to be dependent on someone who has other important obligations. Consider that you may need to pay for a full-time health aide if you wish to stay in your home.

 

Who can make financial and medical decisions on your behalf?

 

Incapacitation is another big concern in retirement. Incapacitation is the inability to make or communicate decisions about your finances or health care. Again, this is often caused by cognitive issues.

Without any input from you, your relatives or doctors may be forced to make decisions on your behalf. They may make choices that you wouldn’t make for yourself. You can avoid this risk by establishing written planning documents such as a power of attorney or a living will. These legal documents provide exact instructions on how your health and finances should be managed and who should make decisions on your behalf.

How will you pay for care?

 

A recent Genworth study found that the average room in an assisted living facility cost $3,750 per month. An in-home health aide was more expensive, costing on average more than $4,000 per month.3 How long could you afford to pay those costs out of your retirement assets? Consider that many people need long-term care for several years.

You may want to look at long-term care insurance. You pay premiums today in exchange for long-term care coverage in the future. Coverage varies by policy, but most insurers cover care that’s provided either in a facility or in a home, and will pay some or all of your costs. A financial professional can help you find the right policy for your needs and budget.

Ready to plan your long-term care strategy? Let’s talk about it. Contact us today at Retirement Peace Project. We can help you analyze your needs and implement a plan. Let’s connect soon and start the conversation.

 

1https://money.usnews.com/money/personal-finance/articles/2016-09-23/many-women-will-be-single-in-retirement-are-you-ready

2https://longtermcare.acl.gov/the-basics/how-much-care-will-you-need.html

3https://www.genworth.com/aging-and-you/finances/cost-of-care.html

 

Should You Choose Riders on Your Long-Term Care Insurance Policy?

Thinking of buying long-term care insurance? That could be a smart decision. Long-term care is likely to be a reality for many retirees. The U.S. Department of Health and Human Services estimates that 70 percent of today’s 65-year-olds will need long-term care at some point in their lives.1

Long-term care could deplete your retirement assets. Many people need long-term care for several years. While care can be provided either in a facility or in the home, both types usually cost thousands of dollars per month. That type of cost can quickly add up.

Long-term care insurance can help cover some or all of the cost, depending on your type of policy. You pay premiums today in exchange for protection in the future. Not all policies are the same, though. There are many different types, and each has its own set of costs and benefits.

Many policies also offer optional riders. These are benefits you can add to your policy for an extra charge. The extra benefits may provide unique protection or fill a specific need. Below are three of the most commonly used riders. Before you buy your policy, consider your needs and which riders may best help you meet your objectives.

 

Spousal Benefit

 

If you’re married, a spousal benefit rider could be an important feature. Most long-term care policies have lifetime caps on coverage. These are sometimes expressed as a benefit dollar amount, but other policies have a maximum number of months they will cover.

The spousal benefit combines the maximums of each spouse into one pool. That way, either spouse can use the benefit as needed. Some policies will even increase the maximum coverage to accommodate both people. This benefit can increase the cost of the policy, but it can also provide a valuable level of protection.

 

Return of Premium

 

One of the biggest concerns many people have about long-term care insurance is the risk that the policy will never be used. Of course, not using the policy means you didn’t need long-term care, so that’s not necessarily a bad thing. However, you may not feel great about paying premiums for years only to never put the policy to use.

Some policies offer return-of-premium riders. These riders vary by policy, but they essentially return a portion of your unused coverage to your beneficiaries upon your death. Some companies will package this benefit as a life insurance hybrid. These riders are appealing, especially for those who want to leave a legacy. However, the rider can also significantly increase the cost of the policy.

Inflation Protection

 

This may be one of the most important riders available. Health care costs are rising all the time. Long-term care costs are no exception. It’s possible that you could buy your policy and then not use it for years. Costs could rise over that time, reducing the impact of your coverage. Inflation protection riders increase your benefit each year to keep up with rising costs. The rider may increase your premium, but it may be worth the extra cost.

Ready to find the right long-term care plan for your needs? Let’s talk about it. Contact us today at Retirement Peace Project. We can help you develop the right strategy for your goals and your budget. Let’s connect soon and start the conversation.

 

1https://longtermcare.acl.gov/the-basics/how-much-care-will-you-need.html

 

Digital Assets and Estate Planning: 3 Tips to Protect Yourself

Estate planning should be a component of any financial plan. The term generally refers to the distribution and management of one’s assets after a person passes away. While it may not be pleasant to think about your death, it’s an important exercise. You can create a lasting legacy and eliminate needless stress for your loved ones by developing a strategy. Estate plans usually include a will, trust and other planning documents.

Estate planning isn’t just for financial assets, though. You also may want to include guidance and instructions for your digital assets. For example, your email could contain important or sensitive information. Perhaps you have privacy concerns with your social media accounts. Maybe you have photos on a cloud server that would hold sentimental value for your family. You may even have online investment accounts or income streams that your loved ones may need to access.

While the world may have gone digital, much of estate planning law isn’t quite there yet. There aren’t many laws that govern how digital assets and accounts should be handled after someone passes away. While a will, trust and other tools are accepted as legal documents to manage financial assets, it’s unclear how these documents can be used with regard to digital accounts. Below are a few tips on how to navigate the digital afterlife:

 

Decide on your objectives for your accounts.

 

It’s always helpful to clarify your wishes and objectives before you take action. Start by listing your important accounts, such as email, social media, photo and file storage, and more. Then think about what should happen to each account after your death.

Would anyone need access to the account for any reason? Would your family need to search your emails or perhaps access a financial account? Are there any assets like photos or messages that hold sentimental value?

Privacy should also be a concern. Is there anything in your email or social media accounts that you wouldn’t want your family members to see? There may be certain information or communications that you don’t want to share with your children or other loved ones.

 

Research how various platforms handle inactive accounts.

 

Most digital companies have policies in place on how they handle accounts for deceased customers. Some are very strict and won’t allow access to anyone else without some kind of court order. Others will allow another person to access the account if it’s been inactive for a prolonged period. Some social media companies will keep your page up as a “remembrance page” with limited access to others.

Do some research to see how your primary account platforms operate after a user’s death. They may allow you to designate a backup person to take over your account or access certain information. If they don’t allow that option, you may need to consider alternative strategies.

 

Create written instructions for your heirs and loved ones.

 

Theoretically, you could include account management instructions, usernames and passwords in your will or other documents. That may not be a great idea, however, as those documents are often filed as public record. That means anyone could gain access to your accounts.

Instead, consider using a password management tool to store login info, and then simply have your estate executor provide that info to the appropriate person. You could also store a document with digital asset instructions along with your other important documents, such as your insurance policy, will and others.

Ready to review your estate planning strategy? Let’s talk about it. Contact us today at Retirement Peace Project. We can help you analyze your objectives and all your assets, and then develop a plan. Let’s connect soon and start the conversation.

Business Owners: Avoid These 3 Estate Planning Mistakes

Every business owner has to make an exit at some point. Some owners leave on their own terms, either through retirement or with the sale of the company. Others, though, exit before they’re ready via disability, health issues or even death. While it may not be pleasant to think about the latter category of exits, it’s important to consider what may happen to your business and your family if you pass away.

Estate planning can sometimes be a complicated process, but it can be even more complex if you’re a business owner. You have to consider how to compensate your family for your years of investment and hard work. You also may have business partners to think about. And you probably want to create a smooth transition for your employees, customers and other interested parties.

Fortunately, with some discipline and proactive planning, you can create a strategy that meets your goals and protects your family and business. Below are a few common mistakes that business owners make when planning their estate. If you can avoid these, you’ll have a good head start on protecting your legacy.

Not planning for probate.

Probate is the legal process of settling an estate. After a person passes away, his or her estate flows through the local probate court. During this process, the court and the estate executor settle all outstanding debts, file and pay final taxes, liquidate assets, notify heirs and handle countless other tasks. As you might imagine, probate can be time-consuming and can generate substantial costs.

Some assets are exempt from probate, but only if they are titled correctly. For example, IRAs, life insurance, annuities and even trusts are exempt from probate because they have beneficiary designations.

Without proper planning, however, your business may have to go through the probate process. That could leave ownership unsettled for months or even years. The court may decide who inherits your business, and it could choose someone you wouldn’t have selected. The legal and administrative fees could also drain your estate assets. You can avoid all this by working with an estate planning professional to develop a strategy.

Not having a buy-sell agreement with your partners.

You may have a co-owner or partners who have helped you finance and build your business. In fact, it may make the most sense for your partners to take over your share of the business after you pass away. After all, they understand the company and have been intimately involved in its growth.

However, that doesn’t mean you should simply leave your share to your partners. You’ll want your spouse, kids and other loved ones to be compensated for your hard work. If you leave your share to your partner, he or she may have no legal obligation to pay your family for your investment.

Instead, work with a professional to establish a buy-sell agreement. This tool governs how your share is transferred and how your family is compensated. These agreements are often funded with life insurance, so you can rest easy that your family will enjoy the fruits of your hard work.

Not choosing a successor in advance.

If you’re like a lot of business owners, you want your legacy to last well into the future. Even after you’re gone, you may want your business to continue providing for your children and grandchildren. And you likely want your company to continue to serve your customers.

For business owners, estate planning isn’t just about handling the financial transition of the company. It’s also about putting the right successor owner in place to lead the company for years to come.

Take time now to think about who the next owner should be. Should it be a child or other family member? What about a key employee? Maybe a competitor or vendor would be best to take over the business?

The earlier you think about these questions, the sooner you can develop and implement a transition plan. It might take years for you to train the next owner. It’s better to start that process sooner rather than later.

 

Ready to develop your estate plan? Let’s talk about it. Contact us today at Retirement Peace Project. We can help you analyze your needs and goals, and then develop a strategy. Let’s connect soon and start the conversation.

Have You and Your Spouse Discussed These Questions?

Retirement is a happy milestone, but it can also be a transition that brings difficult issues and challenges. Those challenges can spur tough conversations, especially between spouses. One of the most difficult issues for any couple is facing the prospect of declining health and even death.

It may not be pleasant to think about your own death or your spouse’s death, but it’s a discussion you shouldn’t ignore. It is probable that one of you will outlive the other, perhaps by years or even decades. By discussing death and end-of-life matters in advance, you can ensure financial stability for the surviving spouse.

Below are a few questions to discuss. If you don’t have answers for these questions, it may be time for you and your spouse to discuss them.

 

What assets, insurance and benefits are available for the surviving spouse?

 

If you’re like many couples, you and your spouse have accumulated a wide range of assets, benefits, and insurance policies over the years. It’s not uncommon for a retired couple to have employer retirement plans, individual retirement accounts, life insurance policies, pensions and more. The surviving spouse should be aware of all these assets and accounts so he or she can get their financial affairs in order.

Create an inventory of all these assets and accounts. The document should include a title for the asset or policy, the contact information for the firm that manages the asset and an estimate of the asset’s value. You should also include potential income sources, such as Social Security, pension benefits and more.

You probably don’t want your spouse to have to track down accounts and insurance policies in the days, weeks and months following your death. Discuss in advance and create an inventory to help them through this process.

 

What are your goals for your estate?

 

Do you and your spouse have an estate plan? Many people believe estate planning is only for the ultra-wealthy, but the truth is that it’s important for anyone who wants to leave a legacy for their loved ones.

Review your current planning documents, including wills, trusts and more. Has anything changed with your situation that would impact your estate and how it is distributed? Are there new children or grandchildren in the family who aren’t included in your current plan? Has the value of your assets increased, making it possible for you to leave more to your loved ones than you had originally anticipated?

You may want to consult with an estate planning professional. They can discuss your goals and objectives with you and then examine your current documents. If needed, they can help you revise or create new documents that better reflect your wishes.

 

Do you or your spouse have specific end-of-life wishes?

 

It’s possible that you or your spouse could spend the final days, weeks or months in a hospital or other health care facility. If you or your spouse develop a cognitive issue like Alzheimer’s, you could spend much of your final years in a state of incapacitation, a condition in which you are not able to communicate your own decisions and desires.

Now may be the time to discuss end-of-life care with your spouse. That way, both of you will fully understand the other’s wishes. You will then be able to make more informed decisions regarding each other’s health care should one of you become unable to make those decisions yourself.

Are you and your spouse ready to answer these tough questions? If so, let’s talk about it. We can help facilitate this conversation, and then help you and your spouse become better prepared. Let’s connect soon.