Salines-Mondello Law Firm, PC

A Tale of Two Estates, One with a Solid Plan

Two people who handled their planning differently.

The value of advance planning aimed at helping loves one in the event you pass away or become disabled, is strongly reinforced in an article in the Sedona Red Rock News titled “Plan ahead in case of sudden sickness or death.”

One man called Ben has been married for 47 years and he’s always overseen the family finances. He has a stroke and can’t walk or talk. His wife Shirley is overwhelmed with worry about her husband’s illness. Making matters worse, she doesn’t know what bills need to be paid or when they are due.

Another person is Louise. At 80, she fell in her own kitchen and broke her hip, a common injury for the elderly. After a week in the hospital, she spent two months in a rehabilitation nursing home. Her son lives on the other side of the country, but he was able to pay her bills and handle all the Medicare issues. Several years ago, Louise and her son had planned what he should do in case she had a health crisis.

More good planning on Louise’s part: all her important papers were organized and put into one place, and she told her son where they could be found. She also shared with him the name of her attorney, a list of people to contact at her bank, primary physician’s office, financial advisor and insurance agent. She also made sure that her son had copies of her Medicare and any other health insurance information. Her son’s name was added to her checking account and to the safe deposit box at the bank. She made sure to have a legal document prepared so her son could talk with her doctors about her health and any health insurance matters.

And then there’s Ben. He always handled everything and wouldn’t let anyone else get involved. Only Ben knew the whereabouts of his life insurance policy, the title to his car and the deed to the house. Ben never expected that someone else would need to know these things. Shirley has a tough job ahead of her. There are many steps involved in getting ready for an emergency, but they are necessary.

First, gather up all your important information. That includes your full legal name, Social Security number, birth certificate, marriage certificate, divorce papers, citizenship or adoption papers, information on employers, any military service information, phone numbers for close friends, relatives, doctors, estate planning attorney, financial advisor, CPA and any other professionals.

Your will, power of attorney, health care power of attorney, living will and any directives should be stored in a secure location. Make sure that at least two people know where they are located.

Financial records should be organized. That includes all your insurance policies, bank accounts, investment accounts, 401(k), or other retirement accounts, copies of the most recent tax returns and any other information about your financial life.

An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances.

Reference: Sedona Red Rock News (July 9, 2019) “Plan ahead in case of sudden sickness or death”

Thousands of Social Security Recipients Owe for Medicare Premiums

Social Security didn’t make Medicare payments.

Errors at the Social Security Administration means that thousands still owe for Medicare, according to NPR in “Social Security Error Jeopardizes Medicare Coverage for 250,000 Seniors” The problem applies to private drug policies and Medicare Advantage plans that provide medical and drug coverage and are substitutes for traditional government-run Medicare.

Some people will need to find the money to pay the plans, while others may have their plans cancelled and need to fight to have them reinstated.

Both Medicare and Social Security expect proper deductions and payments to resume either this month or next. Insurers are required to send bills directly to members for unpaid premiums, says Medicare.

Neither Medicare nor Social Security would explain how or why the error occurred or provide the specific names of the plans that were shortchanged. They also didn’t give the amount that the plans were owed. There is a notice to Medicare’s beneficiaries on the website, but it is lacking in detail. The House Ways and Means Chair, Rep. Neal, hasn’t received any response from either agency.

Organizations that represent seniors are getting some questions from their members. Two women in Louisiana lost drug coverage, after their policies were canceled as a direct result of the error. A woman in Ohio was reinstated in fewer than 48 hours after the state’s insurance information program for seniors got involved.

Some people may not have noticed that their Social Security checks did not include a deduction for their Medicaid Advantage or drug plan premiums. They may have thought the extra amount was an expected cost-of-living increase.

Medicare beneficiaries have had the option of paying premiums through a deduction from their Social Security benefit checks for more than a decade, or they can pay directly through a credit card or a checking account instead of from their Social Security benefits.

Insurance companies must allow members at least two months from the billing date to pay. They must also offer a payment plan for those who can’t pay several months of premiums at once.

The acting director for the Medicare Plan Payment Group warned companies that they must take these steps to avoid invoking their policy of disenrollment, if the member fails to pay premium while the member is adhering to the payment plan.

Reference: NPR (June 6, 2019) “Social Security Error Jeopardizes Medicare Coverage for 250,000 Seniors”

 

Understand the Value of Supplemental Insurance

Additional insurance can go a long way in protecting you and your family.

There are some basic insurances, such as life insurance and long term care insurance, that are easily understood, because they are commonly made available by employers but there are others, including critical illness insurance, that should be considered, according to the balance in “What Is Critical Illness Insurance.”

Critical illness insurance, which is also known as critical care insurance, is a type of insurance policy that pays insurance policyowners with a lump sum payment after they are diagnosed with a specific type of illness that is listed on their insurance policy. This insurance may also be structured to make serial payments, based on the policyowner’s ongoing medical treatments or condition.

Some critical coverages are very limited and only cover a handful of illnesses, while others can provide coverage for as many as thirty different conditions.

Like any kind of insurance policy, it’s important to read the fine print. There will likely be conditions attached to getting a cash payout. Do the research before signing up.

Some critical illness policies cover the portion of the cost of any diagnostic or screening tests for a condition. If you have regular colonoscopies, for instance, and you own a cancer policy, it is possible that the unreimbursed portion of your procedure could be covered by the critical illness policy. A good policy could work for you during your entire healthy life, as well as during a critical illness.

Some of the critical illness policies provide an option to combine critical illnesses coverage with additional life insurance, accident or disability insurance. If you want to maximize coverage and avoid having to manage a few different insurance policies, this may work for you. Again, read the fine print. You don’t want to put all your insurance eggs in one basket, only to find that the conditions are counter-productive to your coverage goals.

Critical illness insurance usually comes with a list of illnesses that are included in the policy. Each one will have very specific criteria that will define whether you qualify for a benefit payment. There are cases where people may think they have coverage because of a diagnosis, only to learn that they have not met the specific criteria.

Deciding whether you need critical illness insurance, in addition to your employee benefits, is a personal decision. If you are paying several hundred dollars a month for many years and never become ill, then you may not consider the money well spent. However, if you receive a diagnosis of a critical illness and you receive a large payout, you’ll be glad to have the coverage.

Reference: the balance (March 11, 2019) “What Is Critical Illness Insurance”

All Grown Up Now? Then You Need an Estate Plan

Do you want to decide your estate plan or leave it up to the state to decide?

The creation of an estate plan is something that causes hesitation in many Americans. However, there are some very good reasons why you shouldn’t delay, according to Forbes in “6 Reasons Why You Need an Estate Plan.” 

Here are a few of the reasons why an estate plan is a good idea:

Plan for your needs. If you should become incapacitated or unable to make your own decisions, an estate plan will protect you, your assets and your family. Part of your estate plan is preparing for this type of scenario. What kind of cash flow will you need and is there insurance missing from your plan? You should designate a healthcare proxy or a power of attorney who can make medical and financial decisions on your behalf, if necessary. Speak with the people who you want to name to these key roles, so they are prepared and understand your wishes in advance.

Dispose of your assets. With no will, your state will decide how to distribute your assets. At the very least, check your beneficiary designations on accounts so your financial and investment accounts and insurance proceeds go to the right people. A will clearly defines how you want your assets distributed at your death and saves your family from the time, expense and frustration of trying to figure out what you wanted, and what the law allows.

Minimize taxes. If there’s a substantial amount of wealth involved, that you want to transfer to other family members or loved ones, the estate planning process can help you do this in the most tax-efficient way possible. Speak with your estate planning attorney about different types of taxes to consider: the estate tax, gift tax and generation-skipping transfer taxes. Since the IRS places limits on how much money can be transferred and to whom without being taxed, an estate plan outlines a wealth transfer strategy.

Create a philanthropic legacy. How do you want to be remembered after you die? Do you want to create a family foundation, endow a scholarship or participate in a donor-advised fund to support a cause that is important to you? There’s also the question of giving while you are alive, to enjoy seeing the results of your generosity.

Protect the wealth of the family. Your assets can come under pressure in many different ways, while you are living. Frivolous lawsuits can become an expensive nuisance. Estate planning can remove your name from assets and put them into legally-protected vehicles, such as trusts or limited liability entities. Insurance is also a part of estate plans, with certain types of insurance used to protect you against a variety of legal challenges.

Prepare future generations. For families that have accumulated large amounts of assets, instilling and preserving the family values over generations is a difficult but do-able task. Families that are successful in building long-lasting legacies devote time to teaching children about stewardship, civic and fiscal responsibilities and their role as part of a family that takes its achievements seriously.

An estate planning attorney can advise you in creating an estate plan that fits your unique circumstances.

Reference: Forbes (Sep. 13, 2018) “6 Reasons Why You Need an Estate Plan”

Waiting Not Good Idea in Estate Planning

Want to protect your family and cut down on stress and some difficult consequences your heirs may face? Get started on estate planning.

Estate planning is likely to bring the best results, if it is done early and kept up to date, according to Guidon in “In the Works: Don’t Wait: Considerations in Estate Planning.”

The two most common ways to transfer wealth and property are through a will and  beneficiary designations. The use of a will requires probate, which is the process of having the court review the will and “prove” it is the last statement made by the deceased. It can be expensive and time-consuming.  Therefore, many people work with their estate planning attorneys to maximize the assets that have beneficiary and contingent beneficiary designations.

The beneficiary designations can include people, organizations, charities or trusts, or a mix of all of them.

Most of our wealth in this country is transferred through a will. However, it can only transfer property subject to probate. Some examples are real estate, also known as real property, personal property and accounts with no beneficiary designation or surviving joint owner. Accounts that are typically transferred by beneficiary designation, include life insurance policies, annuities, pensions, IRAs and 401(k)s.

Keeping beneficiary designations up to date with changes in your life is very important. Births, deaths, divorces and marriages are all trigger events that require a look at your estate plan and your beneficiary designations.

Here’s something to keep in mind: beneficiaries are not notified when changes in their status are made. If you take someone who was a beneficiary off an insurance policy, they are not going to get a phone call or an email from the insurance company. People are often worried about the repercussions of changing beneficiary designations or even their wills. Unless you tell people there has been a change, they will not know until you pass.

An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances. It may also benefit from the new tax laws.

Reference: Guidon (July 19, 2018) “In the Works: Don’t Wait: Considerations in Estate Planning”

Bad News Received: What Do You Do Next?

A diagnosis of a fatal illness leaves everyone in shock.  However, when reality sets in, other considerations need to be handled.

If the worst news is received on the medical front, emotional and medical resources are necessary.  However, legal considerations are also needed to handle end-of-life planning, according to CNBC in “When end-of-life planning is suddenly a lot closer than you thought.”

A good place to begin is to start assembling all your financial information in one place. An old-school, loose-leaf binder may be easier for your family, depending on their comfort level with technology. If your family is accustomed to online portals where information is stored, consider the emotional state of shock they will be in. Make it as easy and accessible as possible for you and them.

The information should include your Social Security benefits and pension information. There may be survivor benefits that your family will need to know about.

Include the prior year’s tax returns and a note, as to where your other tax returns can be found.

If you don’t have a will, power of attorney, healthcare directive or any estate planning legal documents in place, it is now the time to make an appointment with an estate planning attorney.

Another task will be to designate beneficiaries for any financial accounts and insurance policies. Depending on your brokerage house, you may be able to attach a transfer-on-death instruction to your non-retirement accounts.

You can do the same thing with real estate in 27 states. An estate planning attorney will know if this is applicable to your state.

Next, make a list of your liabilities. It should include your mortgage, car loans and credit card debt.

Create a contact list for your family that includes your estate planning attorney, CPA, financial advisor and insurance agent.

Should you pay off your mortgage? This might not always be the best move. Consider the funds available, your tax bracket and the current mortgage. Do you want a family member to be able to live in the house? Your estate planning attorney will be able to run through different scenarios and strategies.

Write a legacy letter. This is not a legal document but a letter that will express your intentions for your will and your wishes for personal property.

Reference: CNBC (July 18, 2018) “When end-of-life planning is suddenly a lot closer than you thought.”

Should You Continue Paying for Insurance?

If the original reason for insurance stops, there may still be some value to the policy.

The New York Times recently reported on potential problems with stopping insurance premium payments in "Wringing Cash From Life Insurance."

The most common reason to get a life insurance policy is to provide financial support for a spouse or other loved one, after the policy holder passes away.  However, if the spouse or other loved one predeceases the policy holder, should the policy be cancelled and the money spent on other things?

One problem with that thinking is this: all of the money that was paid in premiums is basically wasted.

Older Americans can often get cash by selling their life insurance policies to life settlement companies that see the policies as good investments.

The settlement company continues to pay the premium and then receives the payout when the original policy holder passes away.

For a life settlement company to see the policy as a good investment opportunity, they have to take a gamble that the policy holder will pass away sooner rather than later. Therefore, the older and sicker an insured is, the more money he or she is likely to get when selling a life insurance policy.

Reference: New York Times (Oct. 13, 2017) "Wringing Cash From Life Insurance."