Posted by & filed under Estate planning, Inheritance Tax, Living Trust, Loss of a Spouse, Secure Act.

Saving for retirement is a task that unfortunately we Americans have become worse and worse at over the years. Over half of the American population has not saved enough for retirement at the time of retirement and end up having to return to work with at least a part-time job. A full 25% of Americans don’t have any retirement savings or plans in place at any given time in their working careers. However, a law that was just signed into law by Congress on December 20, 2019, aims to improve and aid in Americans preparing and saving for retirement. The bill, called The Setting Every Community Up for Retirement Enhancement (SECURE) Act, has five major key takeaways that affect estate planning:

  • Part-time employees will now be qualified for retirement plans under their employers.
  • Small business owners will now be able to set up 401(k) accounts for their employees. 
  • 401(K) statements will now need to disclose potential monthly payments to the recipient on every balance statement 
  • The age at which you need to begin withdrawing money from retirement savings accounts has been shifted to 72 years, instead of 70.5 years. 
  • IRA distributions have been drastically altered.

How Are Part-Time Employees Affected?

 Under the SECURE Act, part-time employees who work at least 500 hours a year and have been with the institution for 3 years or more will now not be exempted from contribution plans from the employer. This will have a huge impact on those who have moved from full-time employment to part-time, instead of fully retiring. This will have a major impact on those who are 65 and above, who, in the last decade or so, have been forced to continue working in some capacity because their retirement accounts cannot support them fully. 

How Are Small Business Owners Affected?

The next large take-away from the SECURE Act is that now small businesses will be able to offer retirement plans for their employees. Previously, it was costly for small businesses to offer these kinds of options to their staff members, leaving employees to plan for themselves. Now, it will increase the cap of the income that employees need to be able to save from 10% of income to 15% of their income. This adjustment is important for those who have spent their lives in small businesses, and have been left to their own devices in terms of retirement planning. This aims to assist them in making their retirement planning more feasible.

How is My 401K Affected by the SECURE Act?

 Another significant part of the SECURE Act is the transparency it will require from 401(K) accounts. As of right now, 401(K) accounts are not required to disclose the monthly allowance the retiree would be receiving on each statement. While this might seem trivial, the sum of money saved has been allowing Americans to become falsely secure in the amount they are saving, without having a real concept of what that sum will translate into. Now, 401(K) accounts will be required to display the monthly allowance on every balance, for the retiree to better understand exactly the sums they will be receiving when they do retire. 

How Does the SECURE Act Affect Our Retirement Age?

Finally, the SECURE Act adjusts the age at which people need to begin withdrawing money from 70.5 years to 72 years of age. While this is a subtle change, since the majority of people are working into more advanced years anyways, those who do not need to withdraw money will have an additional 1.5 years to keep that money in their retirement accounts. Withdrawals from the retirement accounts are still allowed before then, but this increase in age is aimed at helping those who are continuing to work anyways, by allowing them more time to save.

How Does the SECURE Act Affect An IRA?

Trusts should no longer be beneficiaries of most IRA’s under the SECURE Act.  Previously if your living trust was written properly your trust could be the benefit of your IRA so that your trustee could maintain some control over your beneficiaries.  Now with the SECURE Act, if your trust is named one of the beneficiaries, the beneficiaries of the trust will probably have to take distribution of the entire IRA in the 10th year after death, which will result in a larger tax burden. Finally, if your IRA beneficiary is very young or disabled, you will want to consider a “trusteed IRA” which allows a professional to manage the IRA after your death.

How Does the SECURE Act Affect My Inherited IRA?

You will have to pay taxes on inherited IRAs sooner than you may have expected. The SECURE Act essentially eliminates the “stretch IRA,” which was an estate planning method that allowed IRA beneficiaries to stretch their distributions from their inherited account — and the required tax payments on them — based on their life expectancy. For example, if you named a grandchild as your beneficiary, most of your account could’ve stayed invested for decades after your passing, and the grandchild could’ve continued to take advantage of the tax benefits. Under the new law, however, most beneficiaries must now withdraw all the distributions from their inherited account and pay taxes on it within 10 years. The exceptions to this are for spouses and the chronically ill or disabled. One important thing to remember is that this provision is not retroactive and will not affect those who have already inherited an IRA. It will apply to those starting on Jan. 1, 2020, and may affect the estate planning of those planning to pass on an IRA to a non-spouse.

What Should I Do If My Living Trust Is Named As Beneficiary Of My IRA?

Under the SECURE Act, if your living trust is named as beneficiary of your IRA, your beneficiaries will probably only have two options, both bad: cash it all out immediately, or cash it all out in year 10.  This may cause a huge tax.  There are other options available, but these need to be explored on a case by case basis.  For most people, you simply need to name your spouse as primary IRA beneficiary, and your children as contingent IRA beneficiaries.  However, if your children are young, disabled or foolish, other options will need to be explored.  For example, you may be able to name a trust company or fiduciary as trustee of your IRA.  You can also explore ROTH IRA conversions with your tax and financial advisor.  More complex but powerful options may also be available.

What Should I Do Now?   

With these new changes in retirement planning, you may still have some remaining questions. The Law Offices of Joel A Harris are more than prepared to provide you with legal counsel pertaining to your retirement, establishing a trust to protect your legacy and your assets, and any other legal questions you may have. Whether it is in retirement planning or any other kind of legal counsel, The Law Offices of Joel A Harris, located in Concord, Walnut Creek, and Antioch are available to help you to the best of their abilities. Joel Harris is an attorney with over 25 years of experience and is extremely familiar with this process. If you are not sure how to begin, or you just want some help navigating the legal side of your retirement process, feel free to visit us online, in person or call us by phone at (925) 757-4605.

Sources

  1. https://money.com/what-serure-act-retirement-law-means-for-you/
  2. https://www.bankrate.com/retirement/how-secure-act-could-impact-retirement-savings/
  3. https://www.investopedia.com/what-is-secure-act-how-affect-retirement-4692743
  4. https://www.forbes.com/sites/jamiehopkins/2019/05/24/8-major-ways-the-secure-act-could-impact-your-retirement-plan/#1a8d36d63437 
  5. https://www.kiplinger.com/article/retirement/T021-C032-S014-4-estate-strategies-for-retirees-after-secure-act.html

Posted by & filed under Asset Protection, Estate planning, Funeral Arrangements, Loss of a Spouse.

The loss of any loved one is an extremely traumatic experience, probably one of the most traumatic things a person can go through. To make matters worse, in today’s day and age, once the loved one passes, grieving seems to be pushed aside while important matters such as financial information, arrangements of affairs, etc. seem to take priority. When the loved one that passes is a spouse or significant other, the situation is at its most complicated. The emotional burden of losing them is tremendous, but at the same time, there seem to be a million things that need to be done, all within a short period of time. That is why I believe that the process needs to be simplified so more time and effort can be put into the healing process, and not mountains of paperwork.

Take Care of Yourself 

Oftentimes with the frantic flurry of paperwork and tasks that follow, people don’t allow themselves the proper time they need to process. Taking care of yourself physically and mentally will be crucial in getting your footing back, and getting on the track towards healing. Note that this is just as important if you are taking care of a sick spouse – you will be no good to anyone if you are not well.

Physical exercise has been proven time and time again to be good for not just the body, but the mind as well since it releases endorphins, which are the “feel-good” hormone. Remembering to take a walk, jog, or hit the gym during these times can often be good for your physical and mental health on many levels. Joel does Pilates three times a week and feels great!

Talking to a professional can also be extremely beneficial, although there is a stigma associated with mental health professionals which is often unwarranted. Talking to someone who is trained to help you think through your experience will not only speed up the healing process, but it will enable you to free all feelings that you possibly could not share with close family or friends. 

Take a Look at the Paperwork 

Even though this is the part that shouldn’t be as important as it is, taking care of the essentials for your deceased partner is something that will need attention early on in the aftermath. To help you in this trying time, here is a quick list of the tips that we have to offer you to make the process go as smoothly as possible. 

1. Follow the Money

If you weren’t the one handling the family finances, then begin by researching the assorted expenses paid and also the incomes received. Make sure you understand every expense and know whether or not it’s a one-time or continual gain or expense. Make sure you have enough money accessible to pay off any bills that will be coming in the following months. Cancel unwanted continual expenses of your partner, like medical insurance, subscriptions and club dues, and obtain partial refunds, if obtainable. Keep a joint bank account open for a minimum of one year to accommodate potential odd refunds and expenses. 

2. Make a List

Make an inventory of everything on your mind. Embrace everything you’re thinking that you would like to try and do, everything you’re worrying and stressing out about, and everything people think you ought to do. Then place the things on a list. Complete the things that need to be done, or will need to be done within the next month or two, and let the other tasks take less priority. This is your time to grieve. While some things are unavoidable, the remainder are just other people’s opinions and you need time to think about what your personal steps will be within the coming months. There are books available that have checklists already made for you.

3. Gather Important Documents

Bank accounts, brokerage and retirement accounts, credit card statements, tax returns, life insurance, automobile titles, birth certificates, death certificates (you may want many duplicate copies of the death certificate for money and tax matters to facilitate amendment of ownership), Social Security numbers and estate planning documents, like wills, trusts and powers of attorney. Appraisals for assets, businesses closely-held and substantial personal or distinctive assets are also needed for tax preparations.

4. Talk to a Professional

It’s normal to feel exhausted by all that you’re suddenly facing both personally and financially. And once you become tired, your focus, ability to think clearly, and recall and decision-making all suffer. Make sure that you make time to talk to someone that can help you think more clearly so you can make the best choices for you. 

5. This Isn’t Permanent

While this may seem like a living nightmare (and it probably is), remind yourself that this is not how you are going to feel continuously forever. You will eventually have all the papers in order. While your loved one will not be able to return physically, once you have time to calm down and reflect, you will feel more at peace with the situation. That will take time, though, so be patient with yourself and know that you will need to be strong now, but that it will get better. 

6. Good Time for a Little Legal Help

There are always legal issues when a loved one dies, and some have important deadlines. Be sure to visit your estate planning attorney for a checklist as soon as you have a death certificate.

What Should I Do Now?   

If you are facing the death of a spouse and need legal assistance, The Law Offices of Joel A Harris, located in Concord, Walnut Creek, and Antioch are available to help you to the best of their abilities. Joel Harris is an attorney with over 25 years of experience and kind, understanding, and efficient. If you are not sure how to begin, or you just want some help navigating the legal side of this process, feel free to visit us online, in person or by phone at (925) 757-4605. We understand your situation, and we will strive to make it as clean and simple as possible. 

Sources

  1. https://dontinvestandforget.com/60s/sudden-loss-of-a-spouse-navigating-the-aftermath/
  2. https://www.verywellmind.com/coping-with-death-of-spouse-2301016
  3. https://www.nytimes.com/2016/09/27/well/family/when-a-spouse-dies-resilience-can-be-uneven.html
  4. https://www.ameriprise.com/retirement/life-events/death-of-a-spouse-and-finances/
  5. https://www.kiplinger.com/article/retirement/T065-C032-S014-6-tips-for-those-who-have-lost-a-spouse.html 

Posted by & filed under Estate planning.

Estate Planning Interview with Joel Harris


Did you know that March 31st, 2019 marked a momentous point radio history? Yes, it’s true! I sat down to be interviewed by the hosts of Real Estate Radio Talk for 90 minutes.  In this post I thought it would be a good idea to memorialize the many topics we explored on the show, from probate to sibling disputes over real estate. Let me know if you enjoyed the interview (source at the end of this article).

Q: Are your clients going after short term investment gains through the stock market or are they investing in real estate?

Joel: Most of my clients tend to be older, so they are first focused on planning for a place to stay in their retirement, then on investment properties that will help them live the lifestyle that can be supported.  But it’s not easy to find those investment properties!  

We want to get a good rate of return on any investment so the challenge is where to find those investments.

Q: Can estates be managed in order to be fair to all of the heirs, even when one may be disabled?

Joel: Have you looked into a special needs trust? We can set up a component of your living trust will be called a Special Needs Trust, which will protect the assets and manage them for your disabled child. Then the key is pointing to the right person or profession to manage the money for them. 

Q: What is probate? How can having a trust be beneficial? 

Joel: Probate is court procedure for administering a decedent’s estate when they haven’t done estate planning in order to avoid going to court. If the estate is over $150,000, welcome to court. If you have real estate in California, it doesn’t matter what the value is. If you haven’t made arrangements, then there will be some kind of court procedure. 

Q: What is the consequence of not having a trust set up for the family? 

Joel: The best case scenario is a year or two in court, all assets will be frozen, and expenses starting at 8% of the gross value of the estate plus court costs. The larger the estate the scale drops down, but that is the minimum fee, called the statutory fee. 

I’ve seen cases where the fee hit 100%. When you spend enough time in court, the attorney fees can consume an entire estate. 

Q: What is the benefit of having a living trust?

Joel: When assets are owned by a living trust or other kinds of trusts, they are no longer subject to probate. There are a lot of other protections built into the trust. What’s nice about trusts is that you can change the typical trust (add assets, remove assets). It’s very easy, in what’s called a revocable trust. My advice to anyone who has real estate and heirs that they like is that a trust is the way to go. 

A lot of people that I’ve seen that have set up trusts has never had anyone tell them that they have to put their assets into the trust. A couple of cases recently had someone who did not include their real estate in the trust, and then there is a court procedure. 

Q: Are their new updates to the process or practice of utilizing a trust? 

Joel: There is a new procedure in the state of California where if you have an irrevocable trust, and there is a problem, you can now modify that trust without going to court. If you’ve got an old life insurance trust or your beneficiary now has health problems and the trust needs to be fixed, we can fix it. It’s called trust decanting. If you’ve got an old trust, and somebody has died or set up an irrevocable trust that needs to be fixed, we can fix it. Tax advantages and protecting your heirs is the main reason to do that. 

Another thing I hear a lot is that a lot of clients are concerned about the cost of nursing homes, and wiping out their money. If they get on government benefits and onto MediCal, Medical will go after your estate for repayment. The new law is, if your home doesn’t go through probate then it is protected from MediCal. 

Q: What is the process for sibling disputes over real estate? 

Joel: The bottom line is you have to sell. The person who wants to sell can take you to court and do something called a partition action. Not only will the court require you to sell it through a complicated and expensive procedure, you might not get as much as you would get otherwise. The other owners have two choices: They buy the other out, or sell the property. One owner can make everyone sell. That’s why if we can set up something in the estate plan, then we can anticipate these kind of issues. 

Q: What is the new policy pertaining to trusts before 2012? 

Joel: For everyone who has a trust from before 2012, you need to take a look at your trust and see if you have what was the classic 90’s kind of living trust, called an AB living trust. This trust was set up to divide into two or three different trusts when the first spouse died. Those types of trusts can increase the tax when you die, due to the new tax laws. People who have that kind of trust need to fix that kind of trust immediately. The only time that one would want to consider using this kind of trust is in the case of a blended family, in order to restrict the surviving spouse, even if there is a little extra tax.  


Want to hear more from Joel? He will be a regular throughout 2020!

Are You Worried About Your End of Life Plan?

If you are not prepared with a current estate plan then your family could be vulnerable to higher tax bills, extensive legal fees, and familial conflicts. To avoid those obstacles you should visit an Estate Planning Attorney to get professional help, and create a plan that well suits your goals.

The Law Offices of Joel A Harris are located in the cities of Concord, Walnut Creek, and  Antioch, California.  We have worked for over 25 years giving the best guidance our clients need to protect their assets. Have a question about your planning your estate? Feel free to schedule a sit-down meeting where we are happy to patiently answer every question you may have. For your free consultation reach out to us at (925) 757-4605.

Sources

  1. https://omny.fm/shows/real-estate-radio-talk/real-estate-radio-talk-march-31-2019