The roles are reversed when parents age. You can’t count on them to take the lead in having discussions about money, health, aging and other concerns that come in the later years.
When you were a kid, your parents were in charge. Now your parents are older, and you must be the adult in the room. Embracing that role, with thoughtfulness, will make it easier for you and your parents as you address the issues that come with aging. As recommended in the article “How to Have Difficult Conversations With Your Aging Parents” from Next Avenue, having these conversations will help you all avoid some of the uncertainty and stress in the future.
Here are the conversations you need to have:
The Money Talk. What’s their financial situation? Do they have enough to pay their bills right now? What if they live another ten or twenty years? Do they have a will? Do you know where the will is, and the name of the estate planning attorney who created it? Do they have powers of attorney for finances in place?
The Health Talk. Medical issues that you’ve heard about but aren’t fully informed about need to be clarified. What medications do they take, and is there a list posted on the refrigerator, or located somewhere you can get to it, in the event of an emergency? Have they properly documented a power of attorney for healthcare?
The Aging Talk. Do they plan on aging at home, or are they considering moving to a continuing care facility? What senior living options should they consider, if and when they can’t live on their own anymore?
The End of Life Talk. This is the hardest one, but it is hard for everyone. If they should have a terminal illness, what do they want to happen? Do they have a medical directive, or a living will? How do they feel about extreme measures being taken to sustain life, if they are incapacitated?
The Family Legacy Talk. This is a warmer, happier conversation. What do they want the family to remember about them, and how can you work together to assemble the things that will help accomplish this? Are there family recipes, photo books, treasured heirlooms, videos or jewelry they want to pass along? Are there stories they want to share?
Note that these are not one-time conversations, but processes. Everyone will respond differently, and some parents may need more time to reflect and consider their answers than others. Your parents will need to be ready to have these conversations with you. Some conversations may touch on a raw memory and have to stop, to resume at a later point.
Depending on your parents’ personalities, you may want to speak with them together, if they are both living, or individually. One might be more comfortable discussing certain matters without the other present.
Take notes of the conversation. You’ll be able to review the notes with them if need be and share that information with siblings and family members. You can also see what’s left out. Your notes are not a legally binding document, but they can help when their wills are created or revised.
Estate planning attorneys work with families and aging issues on a regular basis and will be able to discuss these matters with your parents and with you. They’ll know about issues you may not even be aware of. If possible, go with your parents to meet with their estate planning attorney, so that everyone is on the same page.
“The man who took care of Robert Indiana in the last years of his life, told a probate court hearing Wednesday that he was paid roughly $250,000 a year to tend to the aging artist, whose estate and legacy are now the subject of acrimony and lawsuits.”
Under questioning by a lawyer representing the estate, caretaker, Jamie L. Thomas said he’d been earning $1,000 a week in 2013, when he started taking care of artist Robert Indiana, who lived alone on a Maine island, until his death in May at 89.
The New York Times’ recent article entitled “Robert Indiana’s Estate: Generosity, Acrimony and Questions” reported that by 2016, Thomas said the artist had raised his salary to $5,000 a week for round-the-clock work that included bringing him meals, taking care of his dog and helping him to bed. He was also granted Indiana’s power of attorney.
Thomas said Indiana was a generous employer and that the artist had given him at least 118 pieces of art since 2010.
At the hearing, Thomas said that over the last two years he’d withdrawn $615,000 from Indiana’s accounts at his request. He didn’t say for what Indiana used the cash, but that the artist gave him $35,000 to buy a car.
James Brannan, the lawyer who’s the executor of Indiana’s estate, said he was surprised by the large cash withdrawals. Brannan said when he visited the artist’s home soon after his death, Thomas’s wife gave him a gym bag filled with $189,000 in cash. “This is yours,” she told him, “It belongs to the estate.”
Brannan isn’t certain if that cash is part of the $615,000 that was withdrawn.
John Frumer, the lawyer representing Thomas, said the hearing paints an incomplete picture.
“There’s much more to the story than it appears,” Frumer said. “Because it’s a limited proceeding, not all of the facts came out, and they will in time.”
Brannan asked the Knox County Probate Court to help clear up multiple questions that have swirled about Indiana’s finances in recent months. He said he wanted to clarify whether any money is owed to the estate, get an inventory of all the art works Indiana left behind and to address accusations that are contained in a separate lawsuit claiming Thomas and a New York art publisher made unauthorized works under Indiana’s name in recent years. That action was filed a day before Indiana’s death, by Morgan Art Foundation, an international dealer that claims the rights to many of the artist’s works, including the famous LOVE image. The suit claims that publisher Michael McKenzie and Thomas intentionally isolated Indiana from friends and business associates to sell inauthentic artwork attributed to him.
McKenzie said he had returned to the estate all the Indiana artworks that might belong to it. However, Brannan has said that he wants a full accounting of whether the Morgan company owes the estate money for royalty payments due on Indiana items it sold.
Indiana’s LOVE sculpture, with the letters stacked two-on-two and the tilted “O,” became one of the best-known images of the 20th century. The sculpture brought Indiana fame, but he left the New York art scene behind in 1978. He lived on the Maine island of Vinalhaven, an hour by ferry from the mainland, where the reclusive artist lived and worked, surrounded by a crew of studio assistants and workers.
Most people who work for a living dream of retirement. However, for many workers, the idea of retirement comes with its own worries. Will there be enough money? Will I be healthy enough to enjoy it?
Money and health are the two biggest worries about retirement. There are other unknowns: where will we live? How long will we be able to travel? What’s all this about paying estimated taxes, and how does Medicare work? Getting prepared for retirement will be less stressful, says the article “3 Ways to Approach Retirement More Confidently,” from The Motley Fool, if you follow these steps:
Start with a budget. The chances are that you don’t know how much money you spend every month. You’re working, money comes in and it goes out. However, if you know how much money you are spending, and what you are spending it on, you’ll be able to have a handle on how much money you’ll need for retirement. You’ll also be able to see where your discretionary dollars are going and make a conscious decision, as to whether those are dollars that should be going into long-term savings for your retirement.
Remember that while some expenses may go down—like commuting—others will stay the same. You won’t be going to the office every day, but you will want to enjoy yourself. What will your leisure and entertainment activities be, and how much will they cost? How will you handle health care costs? You should also remember that there will be quarterly taxes to be paid.
The more information you can pull together about your spending, savings and unavoidable costs like taxes and health care, the better you’ll be able to plan for this next phase of your life.
How much income will your retirement accounts provide? We tend to focus on how much we need to save, but we should really focus on how much income our retirement savings will generate. How much will your IRA or 401(k) provide on a monthly basis?
Let’s say you’ve saved $500,000 in time for retirement. If you use an annual 4% withdrawal rate, which is the going rule these days, you’ll only have $20,000 a year generated for annual income. If you add Social Security to that amount, you may find that it’s not enough to enjoy the lifestyle you’ve anticipated for retirement. You may find that part-time employment can fill the gap, or you may need to work for a few more years.
Be smart about Social Security. Despite your years of saving, you will likely come to rely on Social Security to pay some of your bills. The smarter you are about your filing strategy, the better positioned you’ll be to maximize your Social Security benefits. If you wait until your Full Retirement Age, you’ll get the full monthly benefit you’re entitled to. If you can hold off claiming your benefits until age 70, you’ll max out as the monthly benefits increase every year you delay claiming.
One of your key resources as you move towards your retirement years will be your estate planning attorney. The process of creating an estate plan will also answer some of your questions about what retirement will bring and planning for aging now will give you a lot more confidence about enjoying your early years of retirement.
“Solo agers face unique challenges, as their needs begin to change.”
Did you know that a study from the Pew Research Center says about 20% of the 75 million baby boomers don’t have children—a figure that’s double what it was in the 1970s and one that’s expected to keep rising.
We mention this because these people need someone to count on to always be there, if they need help making decisions and managing their affairs as they get older.
Our country’s 15 million “solo agers” or “elder orphans” now comprise a demographic that’s unprecedented in American history. This relatively new segment of society has a unique set of challenges.
As your physical, intellectual, and emotional capacities diminish, a person on his own must determine how he will be able to make sound decisions on financial and legal issues, relationships, housing and healthcare. There are also more cases being reported of elder fraud, and new scams are designed to take money from seniors. An elderly person could also wind up lonely and penniless.
However, there is help. Professional guardians can assist the elderly in reviewing their financial statements, creating budgets, paying bills, keeping keep them organized and sorting mail and email to see what’s a legitimate bill or a solicitation or potential scam.
A guardianship, which is also known as a conservatorship, is a legal process that’s used when a senior can no longer make or communicate safe or sound decisions about himself person and/or his property, he’s become susceptible to fraud or undue influence. The fact that establishing a guardianship can remove substantial rights from a person means that it should only be considered after other alternatives have proven ineffective or are unavailable.
In addition to a court-ordered guardianship, there are other options. There are also certified geriatric care managers, certified daily money managers, as well as attorneys who specialize in elder law.
Solo agers should arrange a future legal guardianship for themselves, a person who will assume control in a fiduciary capacity, if they’re unable to make decisions for themselves. This may be a relative or a friend, as well as a professional fiduciary or private guardian.
In addition, everyone should have a healthcare directive and an estate plan. However, solo agers have a more urgent need to have these important documents in place, while they’re still somewhat young and healthy—because they don’t have an adult child who will fly in from the other side of the country to provide that assistance and guidance.
Talk to several potential guardians or fiduciaries and go with the one whose skills most closely fit your needs and with whom you feel the most comfortable. Check their references and credentials thoroughly. You can also select different people for different tasks, which gives you a critical system of checks and balances. Be certain that you understand exactly what services each will provide and their fees and get it all in writing.
Professionals who have had clients with family members suffering from dementia have a greater understanding of the challenges these families face. However, living through the experience personally is totally different.
When a loved one receives a diagnosis of dementia, as described in this deeply personal article from Financial Advisor, “The Limits of Financial and Estate Planning for Dementia,”the family has to begin immediately planning for the present and the future. It is a difficult journey. This story shares the family’s experience to help others.
The father was an extremely intelligent man, with a master’s degree in engineering and an MBA from a prestigious business school. When diagnosed with dementia, he and family members moved quickly to ensure that the correct documents were in place, working with a trusted estate planning attorney. The family’s plan worked well, as his father was able to be active for the early stages of the disease and never injured himself or anyone else.
The elderly, and especially those with dementia, are very vulnerable. They can make poor decisions and are targets of scam artists. There were attempts to scam this gentleman, but the damage was minimal, because there was good planning and good execution of the plan, as well as safeguards.
The man’s wife used the power of attorney to get the bank to maintain strict controls over their funds. There were offers of new credit cards, personal loans and home equity loans coming from the family’s bank. She was able to stop those offers from entering the house.
As his disease progressed and he spent late nights watching infomercials and surfing the net, things started to arrive at the house that were not needed. Limits were put on his credit card. He was removed as a co-trustee for the family’s living trust. The trust document simply required two doctors to remove him as a trustee, so he could not access brokerage accounts, write checks or do any online banking.
His living will was a huge help, when he entered hospice care. When a sibling from out of town arrived, she was outraged to hear that he was not being fed. At that point, he was expected to live only a few days, and that had been his request, which was documented in the living will. After reading it, she understood that this was his wish, and a potential problem was averted.
It wasn’t all neat and tidy. The bank process took time and there was a struggle over the power of attorney, as is commonly encountered. The POA is an important document and banks preferred, as do many institutions, to have their own forms done. Some of the doctors were not as respectful of his wishes, and some were hesitant about putting in writing a recommendation that he no longer drive.
However, despite the difficulties, three things got this family through their father’s journey. The legal documents were in place, the family was nearby and able to help out, and there were friends and others who gave tremendous emotional support.
If you suspect that a family member may be experiencing early symptoms of dementia or Alzheimer’s, it’s time to sit down with an estate planning attorney and start to prepare for what the future will bring. An experienced estate planning attorney knows the documents that will need to be prepared and will also be able to guide the family to various resources.
It’s understood that everyone needs a will. However, many people put it off. Don’t be one of those people. Your family will remember, and it won’t be a happy memory!
Celebrities aren’t the only ones who fail to plan for their passing. The difference is, their failures can become instructive for the general public. If we don’t have a will, only our family will know how much time, expense and stress occurs because of a failure to plan.
Merrill Lynch and the consulting firm Age Wave found in their recent survey that about 50% of study participants age 50 and older didn’t have a will.
The Minneapolis Star Tribune’s recent article, “How to get started on making a will,” reported that many people don’t care to talk with close family members about important financial topics, like their level of financial security, plans for living arrangements in retirement, inheritance or long-term care.
The Merrill Lynch/Age Wave report, “Family & Retirement: The Elephant in the Room,” explains that some of this is due to time constraints and that people say they’ll do it eventually.
However, it’s easy to get started. You can draft an ethical will, also known as a values statement or letter. Do this in the next few weeks or month. The thought is to capture for your immediate family, as well as your grandchildren and great grandchildren, what you want them to know about your values, what mattered to you in life, what traditions you hold dear and how you’d like the world to become a better place.
Creating an ethical will begins with a family conversation. Once you begin recording your values and discussing them with your family, it’s a short hop to discussions about your estate plan.
A great benefit of starting the dialog with an ethical will, is that there’s less pressure on the family and more time to become comfortable with the topic.
These discussions will lead you to finally meet with an estate planning lawyer to write your will.
However, don’t stop with a will. You also need a power of attorney and a medical power of attorney, so that a trusted family member or friend can make decisions on your behalf, if you should become incapacitated.
It may be easier, if you start with a discussion about values and your legacy. However, make sure to take the process to completion, so that your family is protected. You will have done the right thing.
The big picture presented by the National Institute on Retirement Security is not a good one. Working Americans are completely unprepared for retirement.
The National Institute on Retirement Security is a non-profit research and educational organization that focuses on the development of public policies that help retirement security in America. A recent report using U.S. Census Bureau data looked at median retirement account balances for people ages 21 to 64.
Think Advisor’s recent article, “Most Americans Have $0 Saved for Retirement: NIRS” says that the report revealed that nearly 60% of all working-age individuals don’t have assets in a retirement account. That’s based on the Census Bureau’s Survey of Income and Program Participation data from the year 2014.
With 59.3% of people not owning a retirement account, a worker in the middle of the overall workforce would have a goose egg in retirement savings. The National Institute on Retirement Security report found that nearly about three-quarters of workers in the 21-to-34 age bracket, over half of those ages 35 to 44, half ages 45 to 54 and also about half in the 55-to-64 age range don’t have a retirement account.
The report included in its definition of retirement accounts employer-sponsored plans like 401(k)s, 403(b)s, 457(b)s, SEP IRAs and Simple IRAs, as well as private retirement accounts—such as traditional and Roth IRAs. In the report’s analysis, an individual was deemed to own a retirement account, if her total retirement account assets were more than zero. There’s a significant gap between older and younger folks in retirement account ownership, and the report found that that this gap is much wider across income groups.
“Individuals with retirement accounts have a higher median income of $51,024, compared to $17,004 among individuals without retirement accounts—three times as large,” the report states.
The research also showed that the median account balances were insufficient, even among individuals with retirement accounts. In fact, for those approaching retirement (age 55 to 64) with retirement accounts, the average balance was $88,000. The report suggested this amount would only provide a “few hundred dollars per month in income if the full account balance is annuitized, or if an individual follows the traditionally recommended strategy of withdrawing 4% of the account balance per year (this amounts to less than $300 per month).”
Digging into the details presents an even more worrisome scenario. A look at working individuals age 21 to 64 who had any retirement savings found that 22% of them had saved less than a year’s income. And among those closest to retirement—ages 55 to 64—only 17% of those who had retirement savings had a year’s worth of income.
Regardless of your age, anyone who is working should be saving something for retirement, even if it is a small amount from every paycheck. The younger you are, the more important it is to start early. For older Americans, the savings target is far more daunting, but saving something is still better than nothing.
Everyone’s needs are different. For most people, one large policy is enough. However, what if your life is not like everyone else’s? How do you know how much coverage you need?
Most people never really think about adding more life insurance, once they buy a policy. They figure they have that policy and insurance through their job. However, what if you wanted to have more coverage? This recent article from Nerd Wallet, “Can You Have More Than One Life Insurance Policy?” explains some life insurance basics.
First, you can own several policies from different companies. However, when you apply, insurance companies will inquire about your existing coverage to make certain that the amount you want is reasonable.
It’s not uncommon to purchase a lot of coverage without any problems. An insurance agent will usually ask why you need a great amount of coverage, if the total coverage would exceed 20 to 30 times your income.
A frequent need to purchase life insurance coverage is to replace income in the event that the main income-earner passes away prematurely. The answer to this is term life insurance. This policy will cover you for a certain period, like 10, 20, or 30 years. Hopefully, when the term expires, you won’t require that life insurance, because your debts are paid, and you’ve finished raising your family.
Rather than purchasing one large policy, you could get multiple policies of different lengths and amounts to match your family’s needs over time. As an example, instead of getting a single 30-year $1 million policy, you could buy three policies: a 10-year for $500,000; a 20-year, $300,000 policy, and a 30-year, $200,000 policy. This type of “laddering” strategy can save money, and it can work, if coverage needs decrease. This way, you can predict them accurately. At least, that’s the theory.
Note: if you decide to buy just a single policy and discover later that you don’t need as much life insurance coverage, most carriers will let you lower the coverage and pay less.
There are also other reasons to buy coverage, besides replacing income. These can include small-business owner needs, long-term care and estate planning.
Before you invest a lot of money into life insurance, speak with your estate planning attorney. They’ll be able to explain the role that insurance plays in estate planning and outline your general insurance needs.
If you’re living on your retirement savings, while waiting to start taking Social Security benefits to full retirement age or even age 70, you might be costing yourself thousands in taxes.
It’s annoying. There’s no way around it. You’ve worked your whole life, and paid taxes on those earnings. Now you have to pay taxes on your Social Security benefits. However, depending on your asset level, you may want to start getting those benefits earlier, says this article from Kiplinger, “Why Wealthy People May Want to Take Social Security at 62.”
There are many good reasons to wait and take Social Security at full retirement age to get the full benefit amount. In waiting longer to file, the benefit can grow 8% a year from full retirement age to age 70. However, this one-size-fits-all advice may not be appropriate for everyone, especially for the wealthy.
The issue is that everyone wants to up their benefits on the front end. However, if there is no plan to boost those dollars on the back end, by keeping more of your Social Security dollars for yourself instead paying taxes, it’s not worth it. For many seniors, by the time they see they’re going to be giving up to 20% to 30% of their Social Security away in taxes, it’s too late.
Of course, conventional wisdom says that, if possible, you should wait and claim bigger Social Security benefits at age 70. That’s something high earners in many instances can do, but there are an increasing number of couples who’d be better off filing at age 62, and using that income to preserve and build their nest egg.
Look at this example: say that a husband was retiring at age 62. Without his regular paycheck, he and his wife were both about to find themselves in the lowest tax bracket they had been in since their first jobs: the 10% bracket. The question for them, like many Americans, is whether to tap into their IRA and 401(k) in retirement. These are typically the most significant accounts in terms of amounts saved through the working years. If this couple didn’t start Social Security at age 62, they’d need to withdraw heavily from pretax retirement accounts. Based on the monthly distribution rate needed to maintain their budget, those dollars (which are taxed at current income tax rates) would immediately place them into a higher tax bracket (perhaps the 22% bracket under 2018 tax rates).
However, if they take their Social Security payments at age 62, the monthly distribution amounts needed from their retirement savings accounts would be much less. This couple doesn’t want to drain their retirement accounts early in retirement, because it can mean lost opportunities for compounded growth of assets over a 20-to-30-year retirement. If the couple were to take their Social Security at age 62—while in a 10% tax bracket from age 62 to 70—the amount of tax they’d pay on those Social Security benefits would be minimal, maybe even zero.
Talk with your estate planning attorney, who has a clear picture of your tax situation in retirement and has likely designed your estate plan to minimize taxes. Make sure that your plan for when to take Social Security benefits makes sense from a tax perspective.
We’re not talking about what happens to your soul, or if you are headed to a peaceful place, or even what happens to your physical remains. Have you thought about what happens to the world you leave, your family and friends and your possessions, after you die?
Let’s say you don’t believe in anything in particular. Or you’re deeply spiritual and believe that death will be a wonderous journey. Either way, you should devote time and energy to what happens right here on earth after you die, says Forbes in the article, “What Will Really Happen After You Depart?”
No, not just because it’s the right thing to do and not just because you’re curious. It’s because you want your family to remember you for the awesome legacy you plan on leaving, not because of the horrible hot mess you left behind that they spent three years trying to figure it out, while trying to live their lives.
Estate organization is not the exact same thing as estate planning. An experienced estate attorney or elder law attorney can help you draft your will, your advance directive, your power(s) of attorney and a trust, if you need it. Your attorney most likely also has a copy of those documents.
However, the attorney has no power over what you do with your original estate planning documents, once you leave their office.
One idea is to develop a guidebook or “game plan” for your family and loved ones, while you’re alive. It’s known that there’s a strong correlation between how we face death and prepare our families—and their ability to survive, adjust and start the recovery process. Organizing your estate has been called a “gift of love” that goes far beyond when you can be around to take care of your family.
Answer these questions to start the estate organizing process:
Does a family member know where to find your advance directive, if you end up in the hospital?
Where are your legal documents and who in your family knows where to find them?
Who has access to your bank accounts and knows your login data?
Are you now caring for someone? Who’d assume that responsibility, if you’re unable to do so?
Have you made final arrangements for your death, funeral and burial or cremation?
Who knows about the plans and where the paperwork is located?
Where are your insurance documents, and who knows where to find them?
Who’ll take care of your pets, when you are no longer able?
Let’s also keep in mind that getting all these plans and documents in place is just the first step. They don’t do anyone any good, if you don’t talk with your family and loved ones about them. You have to make sure that they understand your wishes to avoid misunderstandings or family feuds, after you’re not around to correct them. The more you can discuss these matters in a calm, caring fashion, the better their grief process will be. Think of this as your opportunity to show how much you care about them. You want them to remember you with love, grieve in a healthy manner and be able to incorporate your loss, as their lives continue. Memories are a powerful force, and how you prepare for your passing, will also be a memory for them.