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Ridgewood Estate Planning Blog

What is planned impoverishment?

Many people in the United States are living longer. For example, half of the infants born in 2007 may live to the ripe old age of 104. However, this extended lifespan does not always translate to the financial means to pay for it, nor does it mean quality of life. It can be frustrating to save for retirement for years and pay off your house only to lose all of what you have to mounting medical bills as you age, and there will be nothing for your heirs.

So, it makes sense that you would want all of the resources possible to preserve your quality of life while still being able to leave a fair inheritance to your children and grandchildren. Planned impoverishment is one way to do that.

Tips for gifting strategies for the elderly

Elderly people need to have a proper estate planning strategy to ensure they leave all their belongings to the right people after death. However, many people fail to do this. A report from the American Association of Retired Persons shows that only four out of every 10 adults in the United States of America actually have a will.

However, many people want to give away their money and possessions while they are still alive. The term for this is gifting, and it can be an excellent way to give away a fortune over time instead of all at once. For people who want to go down this route, they should gift properly to help prevent the gifts from getting taxed too heavily if at all.

How does New Jersey inheritance tax affect your estate?

Estate planning consists of more than drafting a will, establishing a health-care directive and appointing a durable power of attorney. Unfortunately, it also entails considering how various state taxes will affect your estate, which can determine the plans you decide to make.

One such tax to worry about in New Jersey is inheritance tax. Only one other state requires this tax: Maryland. This is the information you need to know about how this tax law may affect your estate.

How can I protect my estate from capital gains taxes?

When it comes to estate planning, the decisions you make can affect the amount of capital gains tax that is assessed to your estate. Capital gains taxes can affect your beneficiaries tax situation and diminish your estate's value. High-value estates are particularly vulnerable. The value of your property and assets as of the date of your death determine your capital gains taxes.

The following strategies can help you to reorganize your plans to protect your estate and loved ones.

What you need to know about protecting your assets as you age

As more Americans reach retirement age and live further into the years beyond it, the issue of asset protection is becoming more important to a larger cross-section of the population. Once you are no longer working regularly, your savings, investments and other retirement funds may become your only source of income. With the right planning and savings during your career, that can be a substantial pool of resources, but it does need to be protected.

The law creates many openings where elder citizens might be vulnerable to exploitation or other sources of asset loss, including the use of their funds by spendthrift family members. There are a variety of ways to plan around this, though. Some require the help of an elder law or estate planning attorney, so knowing your options and the resources they require is the first step.

Do you need to add a living will to your estate planning?

Understanding what makes your estate planning complete can be difficult, especially if this is your first time through the process. As you consider your options and put together your choices for wills, trusts, and other pieces of your larger estate planning picture, it is also important to think about your decisions about end of life care. While some people do not develop strong feelings about the measures used to preserve their lives during a medical emergency and choose to let the doctors' recommendations stand, many people wish to set limits on the treatments they will endure if they move past a certain point of physical incapacitation.

The living will, also known as an advance directive, is your opportunity to make those decisions clear in an enforceable document, protecting yourself and ensuring that your final wishes are carried out exactly. As part of the living will process, you might also select a medical power of attorney to make decisions that you did not foresee, or some people elect to name a power of attorney as their sole measure.

Understanding medical neglect in nursing homes

If you have a loved one who is in a nursing facility, then you know how complex a life change it can be. What you might not realize is that due to the nature of the nursing care system and the current state of regulatory oversight, neglect can happen in ways that are difficult to detect or remedy on behalf of your loved ones. This is mainly due to the fact that these facilities are full-time homes for their residents, but family and other loved ones only see a small slice of what is happening. That dynamic makes understanding the signs of neglect important, so you can act to rectify a situation before there are unforeseen consequences.

What are the benefits of establishing a trust?

For many people, inheritance taxes can impose a substantial burden during a time of grief where there is enough stress and change to navigate already. They can seriously impact one's ability to ensure that one's heirs and beneficiaries are well provided for, and they also create financial planning hurdles that often need to be overcome. While creative solutions like moving across state lines to avoid inheritance taxes have become increasingly popular, family trusts are often more secure, more predictable, and easier to manage in the long run.

Potential federal rules could have major estate tax implications

Last month the Treasury Department proposed rules that could dramatically impact estate tax planning. Specifically, the Treasury Department is planning to limit, or even eliminate, the use of "valuation discounts" for closely-held companies, LLCs and other assets. The Treasury Department issued these proposals in August. On December 1, 2016, there will be a public hearing to discuss the merits of this proposal. It is possible the Treasury Department will formalize changes to these rules before the end of 2016.

What are valuation discounts?

Valuation discounts allow individuals or businesses to divide interests in an asset, thereby reducing its value. For instance, if a business owner divides a family-owned business into three equal parts and gives a part to each child, the value of each piece is less, often much less, than the value of the whole business, since a portion of the business is likely to hold little value. By using valuation discounts, assets that could have faced the estate tax as a whole would not be subject to the estate tax in parts.

Valuation discounts can apply to nonbusiness assets as well. Commonly, the owner of the assets will distribute assets to a holding company or a charity. Owners of the assets could then hold onto their part of the asset until the statute of limitations for an audit has passed, and then sell the assets at full market value.

Communication is key between elderly parents and their adult children

When children are growing up, their parents play a critical role in their development. When parents are growing old, adult children are likely to play a crucial role in caring for their parents. This reversal of roles can be challenging, and will only be successful when both parties understand their roles and have similar expectations. According to Fidelity Investment's Family & Finance report, parents and children don't always see eye-to-eye in these matters. This survey asked parents and children questions about financial support, estate planning, retirement income, elder care and other issues. It found that 40% of families are not in agreement about these important issues.

These misunderstandings were striking in many cases.

  • Roughly three in four parents assume that one child would care for the parents. However, 40% of the children who parents believed to take on the primary caregiver role were unaware of this fact.
  • More than one out of four (27%) of adult children do not know if they will be the executor of their parent's estate.