New York Trusts & Estates

Helping Your Spouse Prepare for the Worst in Yorktown Heights, New York

 

Saying good-bye to your beloved spouse is unimaginable, and yet it happens every day. Make sure that you are both prepared for the business side to help the surviving spouse and family.

Once the basics of estate planning are covered—a will, durable power of attorney, healthcare power of attorney, living will and any trusts—it’s time to dig into the day-to-day details of life that the surviving spouse will need to deal with. In “How to prepare for loss of a spouse,” the Idaho Statesman outlines some of the information that you need to share now, so that a grieving spouse will be better equipped to manage the challenges of life after one of you passes.

Talk with Your Spouse. Keep your spouse up-to-date and share your passwords and other critical information, as well as where to locate them. Speak with your estate planning attorney so if only one of you handles finances, the other will be prepared. Along the same lines, be open and transparent and be sure to title your accounts properly so you know which assets will be passed directly to your spouse (like your home that lists both of you on the title) and those assets that’ll be transferred via beneficiary designation. You should also review your beneficiary designations for IRA accounts and other retirement plans.

Bank Accounts. You should open bank accounts jointly so that you don’t keep a spouse from accessing funds to pay bills and final expenses. The same thing applies to credit card accounts and utility bills, because the card company or utility typically won’t even talk to you, if you’re not named on the account.

Social Security. It’s a hard to claim these benefits when your spouse has just passed, but making the right choice can make a big difference in the benefits you receive over your lifetime. It’s the same deal with a pension plan with a survivor-benefit option.

Budgets. Both spouses should get to know the household budget and your monthly operating expenses.

These kinds of preparations and conversations are a difficult, but necessary part of a loving partnership. Having another member of the family present for these conversations may be useful, just as you would bring a family member or trusted friend to an important doctor’s visit. Sometimes extreme emotions make it hard to process information, so a second set of ears can be helpful.

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Use an “In Kind” Transfer for RMDs in New City, New York

 

Here’s a way to keep your stock shares and hit the mark on your annual RMD goal at the same time.

If you are reluctant to sell off certain stocks in your IRA, but need to satisfy the IRA’s annual RMD (Required Minimum Distribution), this will come as welcome news. According to Kiplinger, in a recent article titled “Retirees, Shift Stock to Satisfy Your RMD,” an “in-kind” transfer provides the perfect solution.

There’s no requirement that you withdraw cash from your IRA, just that a certain amount has to be withdrawn each year starting at age 70½ for tax purposes. It’s fine to have stock or mutual fund shares transferred from your IRA to a taxable account to satisfy your RMD.

Retirees thinking about this move are those who are more likely not to need their RMD for spending money and who feel their stocks can grow in value. Another option is to sell the stock and use the payout from your IRA to repurchase the shares in a taxable account. However, a transfer has some advantages: (i) you’re certain to keep the money invested and (ii) you’re saving some money in transaction expenses.

To do this, calculate the amount you must withdraw from your IRA for the year by dividing your account balance as of December 31 of the previous year by the IRS factor for your age. That factor can be located in IRS Publication 590-B. You then tell your IRA custodian to transfer stock or mutual fund shares whose total value equals the RMD amount from the IRA into a taxable account.

Both you and the IRS will receive a 1099-R from the IRA custodian that shows a distribution of the amount that the shares were valued at on the day of the transfer. You’ll owe tax on the full amount, assuming you hadn’t made non-deductible contributions to the IRA.

Remember that the market can fluctuate between the time you request the in-kind transfer and when it is actually executed. Transfers are valued using the market close price on the day of transfer. Make sure to circle back with your custodian after the move is made to find out the actual value so you are certain to satisfy the RMD. If the transfer was short of your required minimum distribution, you’ll need to move more shares or withdraw cash. If you fail to do this, you’re subject to a penalty of 50% of the shortfall.

Do not wait until the last week of December to make this move. There’s a lot more to transferring stocks than pressing a button on your keyboard and if you wait too long and miss the deadline, you may find yourself with an expensive transfer. You should also bear in mind that when the shares move from the IRA to your taxable account, their tax basis changes to their value at the time of transfer.

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The Rules for Roth IRAs and Working Seniors in Yorktown Heights, New York

 

If you’re 50 and older, you can still make contributions to a Roth IRA as long as you are still working, although there are limits.

For those whose retirement savings are less than ideal, it is good to know that if you are working part-time during retirement, you can still make contributions to a Roth IRA, according to a recent article in Kiplinger’s, “Even Retirees Working Part-Time Can Contribute to a Roth IRA.”

Provided that you have earned income from a job, you can make contributions to a Roth IRA and contribute up to the amount of your earned income for the year. The max is $5,500 for 2016 (or $6,500 if you’re 50 or older). If you work and your spouse doesn’t, you can even contribute up to $5,500 (or $6,500) to a spousal Roth IRA on his or her behalf, as long as your total contributions for both accounts don’t exceed the amount you earned from working. Therefore, your earned income for the year would need to be at least $13,000 if you’re 50 or older and want to contribute the maximum for yourself and your spouse.

In order to figure your maximum contribution, add up your earnings from working, such as any wages, commissions, bonuses, and self-employment income, along with alimony and maintenance payments through a divorce, since these must also be included in the earned income calculation for determining Roth IRA contributions. However, your pension and investment income is not counted.

There’s no maximum age for contributing to a Roth IRA, but you must be under age 70½ to contribute to a traditional IRA. To qualify for Roth contributions this year, your modified adjusted gross income must be below $132,000 for singles and less than $194,000 if you’re married filing jointly. The contribution amount is phased out if your income is more than $117,000 if single or $184,000 if married filing jointly. The MAGI (“modified adjusted gross income”) figure used to see if you earn too much to contribute to a Roth is calculated differently than the earned income figure used to determine how much you can contribute.

The deadline for contributing to a Roth IRA for 2016 is April 17, 2017.

A Roth conversion, that is, converting a traditional IRA to a Roth IRA, might be a good option for retirees who would like the Roth IRA benefits but aren’t earning enough to make the maximum contribution. If you decide to convert to a Roth IRA, make sure to include the taxes that you’ll owe on the converted amount or on part of the converted amount, if non-deductible contributions were made in the past. Speak with an estate planning attorney, if you are not sure if this is the right move for you.

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Another Challenge for Working Women: Providing Eldercare to Loved Ones in New City, New York

 

Caring for aging parents forces many women to work less or leave the workplace entirely. The impact on women’s careers and economics is expected to grow.

Combine the good news of people living longer and the bad news of the increasing cost of caring for the elderly and you have an economic burden that is having a disproportionate impact on mid-career women, according to “Elder caregiving a growing burden to women in mid-career,” an article in The University of Buffalo’s UBNow news website.

The study found that women caregivers were about 8% less likely to work. After providing care, they were 4% less likely to be working. The study was presented at the Women Working Longer Conference hosted by the National Bureau of Economic Research. The research also found that with caregiving increasing, more current generations of women are more likely to provide care than women previously, since millions of individuals are providing care for their parents or their in-laws.

Data was gleaned from the University of Michigan, which has been monitoring participants for more than two decades. The data used in the study of nearly 9,500 people showed that about 33% of the women had provided care for an elderly parent, parent-in-law, or a spouse. That care can entail assisting a loved one with activities of daily living such as eating, bathing, or dressing. The caregiving for parents, peaks at about 56, and caregiving for a spouse isn’t widespread until the late 60s. In addition, with an aging population, the demand for care is apt to rise. Estimates are that 69% of the elderly will require help with daily activities, and 20% of those people will need assistance for five years or more, with the majority of the help coming from wives and daughters.

With baby boomers retiring, these needs will intersect with the need to retain a productive workforce. The caregiving challenge is growing at a time when more women are in the workforce and are working longer.  However, the National Association of Insurance Commissioners reported recently that 10% of caregivers dropped their hours at their jobs due to the demands of caregiving, and about 6% left paid work entirely. In addition, 17% of caregivers take a leave of absence, and 4% decline to take a promotion.

A 2011 AARP study from its Public Policy Institute valued the informal care given by family members in 2009 at more than $450 billion, twice the estimated value of formal care. The long-term economic impact of so many women leaving the workforce and losing income, is expected to have a significant impact on women, their families and the workplace.

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How to Make Gifting a Part of Your Holiday Tradition in Yorktown Heights, New York

 

There are gifts you find under the tree, gifts you exchange at White Elephant parties, and then there are gifts that are part of your estate plan.

In 2016, the federal tax exemption is $5.45 million. A recent article from CBS Boston, “Our Families: Giving It Away,” explains that if your estate is worth more than that, gifting is a straightforward way to lower your tax exposure while allowing you to enjoy watching your heirs or favorite charities benefit from your generosity. Don’t forget another part of this estate plan strategy: in life or death, married couples have an unlimited gifting privilege.

The annual gifting exclusion a person can give away is $14,000 year to as many recipients as we want—provided that you have the money. Married couples can gift $28,000, or $14,000 each.

If you give away your money, your estate won’t be reduced by an estate tax on it when you die.  Therefore, you can whittle down your estate by maximizing your gift exclusion giving to reduce the estate that is potentially subject to estate taxes.

Not only can gifting be an estate planning tool for you to save on future estate taxes, but you can enjoy watching your dollars work for your children or grandchildren while you’re still alive.

However, you shouldn’t give away assets that you might need in the future.

You are allowed to pay for tuition and medical insurance for your grandchildren if they are in college or grad school, but remember that you have to make the payments directly to the college or university. Speak with an estate planning attorney and the school’s financial office to ensure that these payments are made properly. Even if you cover these costs, you can still gift them $14,000 for the year, or double that amount if your spouse joins in.

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Is There a Reverse Mortgage in Your Future? in Yorktown Heights, New York

 

There have been some changes to reverse mortgages in recent years. It may be worthwhile to find out if this might be a useful financial tool for you or your family.

The simplest definition of a Reverse Mortgage is a special type of mortgage that allows a senior homeowner to tap the equity of their home and eliminates the monthly mortgage payment. As long as the borrower lives in the home, they cannot default on the loan or be forced to move, as long as they maintain the home and pay property taxes and provide the required homeowner’s insurance. When the borrower no longer lives in the home, for whatever reason, the loan is repaid.

The Daily World, in “Reverse mortgages—your questions answered,” explains that in order to qualify, the homeowner must be 62 years of age or older and pass a credit check. The home also has to be used as the primary residence.

With a reverse mortgage, the homeowner retains the title and ownership during the life of the loan and can opt to sell the home at any point. The home can have an existing mortgage. Many borrowers apply the reverse mortgage funds to pay off any existing mortgage and eliminate the monthly mortgage payments.

The amount of money one can receive from a reverse mortgage is determined by the following: (i) the age of the youngest spouse; (ii) the value of the home; and (iii) the current interest rate.

The money from a reverse mortgage can be received in a lump sum, in monthly payments, or through a line of credit. It can also be any combination of these options.

Reverse mortgages are insured by the Federal Housing Authority and the Department of Housing and Urban Development (FHA/HUD). If something happens to the lender, HUD takes over the loan and become the reverse mortgage servicer.

There is one important thing to keep in mind. Because there are no monthly payments, the interest on the reverse mortgage loan increases over time. That means the balance due is going to be higher than when the loan originated. It is entirely possible that when you sell or move, you will have little or no equity in the home. The good news: today the borrower and/or their heirs are protected by law and they will never owe more than 95% of the market value of the home, when the loan becomes due.

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RMDs for Retirement Accounts: What You Need to Know in New City, New York

 

New Year’s Eve is the deadline for taking RMDs if you are older than 70 ½. Haven’t started yet? Get on this right away to get it done in time. Otherwise, be prepared to pay a penalty.

You still have a little time to beat the last minute rush on taking your Required Minimum Distributions (RMDs) from traditional IRAs and 401(k)s, according to Kiplinger’s “FAQs About Required Minimum Distributions for Retirement Accounts.” However, you had better hurry if you are older than 70 ½. You only have until December 31^st and any delays could be expensive. Remember that you aren’t the only one making this transaction at this time of year, and you’re hardly alone in waiting until the last minute.

Here is some additional information to help you meet your deadline for IRA withdrawals and some special rules for 401(k)s.

Start now. You should start initiating the process as soon as possible to give plenty of time for the RMD to be made. Submit the request quickly because the call and request volume for financial service providers can get very high at the end of the year. In addition, if your transaction requires you to sell any holdings, it can take time and may be delayed with the markets closed during the holidays.

Charitable giving. If you want to give some of the RMD from your IRA to charity, there is good news. You are allowed to give up to $100,000 from an IRA to charity. You can make the transfer anytime during the year. This is called a qualified charitable distribution, and it must be completed by December 31 to qualify as your RMD.

Your first RMD. The date of your first RMD is based on when you turn 70½, not 70. If you turned 70 between January and June, you turn 70½ in 2016 and must take your first RMD from traditional IRAs this year (or you can wait until April 1, 2017 to take the first withdrawal, but you have to take the second withdrawal by December 31, 2017). Folks who turn 70 between July and December 2016, don’t hit 70½ until 2017. Therefore, they’ll need to take their first required withdrawal in 2017 … or they can wait until April 1, 2018 to take the first withdrawal), but have to take their second withdrawal by December 31, 2018.

Specific RMD rules for 401(k)s. Retirees must take RMDs from 401(k)s starting at age 70 ½, the same as for traditional IRAs. Are you still working? Then you can wait to take your RMD from your current employer’s 401(k) until after you have stopped working. The exception: if you own 5% or more of the company.

RMD rules can be a little confusing. If you have questions, ask your estate planning attorney for guidance.

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Senior Weddings Call for a Different Kind of Planning in Yorktown Heights, New York

 

If you’re walking down the aisle again, there are a number of smart steps to take before you say “I do” another time.

Just as your life was probably simpler the first time you married, your subsequent marriage, especially if it occurs late in life, can become problematic, if good planning doesn’t happen in advance. If you don’t know your legal rights or your responsibilities, reports New Hampshire Magazine in “Navigating Late-Life Remarriage,” you, your children and your new spouse may be in for some unpleasant surprises.

While death and the likelihood that one spouse will outlive the other is inevitable, another important fact is that the divorce rate among those who remarry later in life years is 60%. This is much higher than the rate of any other segment of the population. Some experts think that number may go even higher.

Important considerations in senior marriages are pre-nuptial and post-nuptial agreements. These agreements stipulate rights and obligations in the event of separation or divorce. Although presumed to be valid, proper drafting is essential. Estate planning is critical for those who remarry and have additional issues of blending families and assets. If one or both partners have children and former spouses, a trip to the offices of a qualified estate planning attorney is paramount before the big day.

As you make the appointment with your attorney, here are some of the basics to digest:

• Estate planning documents should be updated to reflect your new marital status and your current wishes;
• You don’t need your spouse’s consent to name someone other than him or her as the beneficiary of your IRAs;
• Your spouse will have rights and benefits to some of your qualified retirement plans, like 401(k)s and pensions;
• Your spouse may waive any provision made for him or her in the deceased spouse’s will and instead take a fraction of the estate, typically one-third to half, depending the number of people in the family;
• If you’re widowed or divorced but then remarry before age 60, Social Security benefits that you collect from your former spouse will be impacted;
• You are responsible for the costs of medical care and long-term care for your new spouse; and
• If you have children in college receiving financial aid, adding your new spouse’s salary to your family income might decrease the amount of aid that your child receives.

Discussions and planning need to take place in advance, because these issues become complicated very quickly. The alternative is that your spouse may be left with a disaster after you pass. An estate planning attorney who has helped older couples work through the issues of blended families, will be able to help you navigate this potentially rocky road.

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What is a Grantor Retained Annuity Trust? In New City, New York

 

A GRAT can make sense for some estate plans, even in when the estate will not need to pay estate taxes.

First, a basic definition: a Grantor Retained Annuity Trust , known as a GRAT, is created by a “grantor” who transfers assets to the GRAT for a specific period of time. A recent article in AccountingWeb, “The Beauty of Grantor Retained Annuity Trusts,” notes that the GRAT, which often contains stock or closely-held business interests, typically holds assets for a specific period of time, which is usually between five and ten years. A GRAT could also be set up for a shorter time period, like two years.

The language of the GRAT will be written, in many instances, to provide that a parent retains the right to receive back, in the form of annual fixed payments (an annuity), 100% of the initial fair market value of the assets transferred to the GRAT.

The grantor will also receive a rate of return on those assets based upon the IRS-prescribed interest rate, which is called the “7520 rate,” after the Internal Revenue Code Section 7520. Section 7520  specifies the way in which this rate is to be calculated. For example, the IRS’s 7520 rate for November 2016 is 1.6%.

An excellent feature of a GRAT is that any asset remaining in the GRAT at the end of the trust’s term will pass to the named beneficiaries without any additional gift tax. The named beneficiaries in many cases will be the grantor’s children. This type of GRAT is often called a “zeroed-out GRAT” because it doesn’t end up with the grantor making a taxable gift due to the retention of an annuity equal to 100% of the assets contributed to the GRAT.

To illustrate this further, the stock of a family business is placed into a GRAT for a term of ten years, and the value of that stock is $500,000. (Note: if you put the stock of an S corporation into a GRAT, you are required to refile the S-election under the QSub rules.) The term of the GRAT is 10 years, and the 7520 rate is 1.6%. Based on these assumptions, you would pay the grantor $50,000 a year, plus 1.6% in interest.

What the GRAT does is freeze the asset—so in ten years, after the GRAT has zeroed out, the appreciated value would remain in the GRAT and pass to the beneficiaries, gift-tax free.

There is a risk associated with the GRAT that needs to be factored into the decision to use it: if the grantor dies during the term of the GRAT, the assets stay in the grantor’s taxable estate and the amount does not avoid any gift taxes.

This simply means that each person has to make an informed decision about whether or not a GRAT could be useful for removing assets from an estate. An experienced estate planning attorney who is familiar with GRATS and their pros and cons, will help you determine if a GRAT is right for you.

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A Checklist for Post-Funeral Tasks in Yorktown Heights, New York

 

There are a number of tasks that need to be done after a loved one passes. An estate planning attorney can help make these tasks easier.

Most people don’t know that there is a time limit on certain tasks that need occur after someone passes away. According to WXYZ Detroit’s article, “Tips you need to know to take a loved one's estate through probate,” you’ll need to contact the Probate Court within 42 days of the death to find out whether you’ll need to have either a formal or informal administration of the estate. That’s just for starters. Here are other things that need to be done after the funeral:

1. Don’t rush to have an obituary notice published. There are scam artists who use the obituaries as an information source for going after estate assets, planning burglaries and engaging in identity theft.
2. See if there are any assets titled solely in the name of the deceased.

• Assets jointly owned pass to the surviving joint party outside of probate;
• Real estate not specifically stating joint tenancy on the deed or husband and wife requires probate; and
• Assets titled in just the name of the deceased require probate.

3. Determine if there are assets in the sole name of the deceased or not held as a joint tenant for real estate.

• Assets with a beneficiary designation, like an IRA, insurance policy, or a payable on death (POD) bank account pass to the named party. If a party isn’t named, they are part of the probate estate.
• Assets not designated with a named beneficiary or held jointly will be part of a probate estate.

At this point, you’re just trying to see if a probate estate is necessary … you don’t have to locate all of the assets to open an estate. Other assets can be added later.

4. Calculate the value of the assets that require a probate estate to determine if you require a small estate process or a full probate procedure.
5. Find the will to see if specific parties are named to inherit and administer the estate.
6. Get the contact information of all parties named in the will and family members who will inherit by law.
7. Obtain an original death certificate and order several copies.
8. If there’s no will, come to an agreement as to who should open and handle the estate as Personal Representative and sign the proper court forms.
9. Contact an established estate planning attorney to handle the estate or advise you, depending on the amount of work you want to handle and your budget. An attorney can complete and file the appropriate forms.
10. File the forms in court and pay the fees to open the estate. You’ll receive a letter authorizing you to speak and act on behalf of the estate as the Personal Representative (you can charge the estate a fee for your time).
11. After the estate is open, publish a notice to creditors and allow four months for claims.
12. Notify known creditors using the court form and include a copy of the death certificate, if requested.
13. Notify credit bureaus of the death to prevent identity theft.
14. Keep searching for assets and determine their value. Within three months of opening the estate, you have to file an inventory with the court and determine fees to be paid to the court based on the value. Assets can be added to the inventory until you close the estate.
15. If the deceased had a home, contact the utilities and arrange for maintenance, then sell it with permission of the court.
16. The estate cannot be closed until all of the claims have been filed, the claimants are all paid, the assets are distributed to the beneficiaries and the proper paperwork is filed with the court. This can be a long process, so don’t expect to wrap it up swiftly.

On a personal note, because this process is taking place while you are grieving, things that may otherwise have been simple tasks can become emotionally fraught. An estate planning attorney’s office may be able to help with these tasks during a difficult time.

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