Amy & Dan Smith's Planning for Life: Misconceptions about 529 Plans

Just like the kids you’re saving college funds for, 529 plans are often misunderstood. Read on to learn 529 plans are more flexible than you may think. They can be set up by anyone, for anyone, and used for a variety of education costs at all kinds of institutions, not just typical four-year colleges.

Myth: Only parents can establish a 529 account for a child
Reality: Anyone can open and contribute to an account for any beneficiary-no age limits or family connections necessary. Often, grandparents open 529 accounts to help fund college for grandchildren (with the added bonus that their assets won’t be factored into financial aid calculations and they may often benefit from reduced taxes on their estate).

Myth: Once the child is in college, he or she has control of the 529 account.
Reality: The account owner has-and maintains-control of the assets as long as the account exists.

Myth: Contributions to a 529 plan will limit financial aid opportunities.
Reality: While 529 assets can have an effect, it isn’t as significant as the impact of some other educational savings tools. Since 529 assets are under control of the account owner (not the beneficiary), they’re assessed at a maximum rate of 5.64 percent when determining expected family contribution (part of the financial aid formula). In comparison, investment assets in the student’s name, such as UTMA/UGMA accounts, are assessed at 20 percent.

Myth: I have to invest in the plan sponsored by the state where I live.
Reality: You can invest in any state’s 529 plan, but look at what your state’s plan offers first since some provide state tax breaks and other benefits to residents. Plans offered by other states may not provide these same benefits.

Myth: If I invest in a 529 plan, the beneficiary is limited to attending a public, four-year university.
Reality: Funds can be used for qualified expenses at eligible institutions in the U.S. and even some abroad, including private or public colleges, universities, and technical or vocational schools that qualify for federal financial aid. Check the department of education’s website (fafsa.ed.gov) and click School Code search to find qualifying institutions.

Myth: If it turns out the beneficiary doesn’t go to college or receives a scholarship, all the money I’ve invested is lost.
Reality: Since the owner – not the beneficiary- controls the account, you can change who receives the funds to any eligible family member. Another, although less attractive, option is to take a nonqualified withdrawal. Earnings are then subject to the usual taxes and a 10 percent penalty (penalty waived in the instance of a scholarship).

Myth: I can’t participate in a 529 plan because my income is too high.
Reality: Anyone can invest. There is actually no income limit to establish or contribute to a 529 plan.

Earnings in 529 plans are not subject to federal tax and in most case, state tax, so long as you use withdrawals for eligible college expenses, such as tuition, room and board. However, if you withdraw form a 529 plan and do not use it on an eligible college expenses, you generally will be subject to income tax and an additional 10 percent federal tax penalty on earnings. Changes in tax laws or regulations may occur at any time and could substantially impact your situation. You should discuss any tax or legal matters with the appropriate professional. 

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com). He has practiced law in Loudoun County since 1980.

Amy & Dan Smith's Planning for Life: Choosing a Fiduciary

The choice of an executor or trustee is very important and will likely have long range consequences. Family wounds can linger for years from a mistake or unwise conduct of the person in charge of the estate or trust.

An executor is appointed in the will. His/her job is to identify and the collect the assets of the estate, pay the expenses of administration and the debts of the decedent, and then distribute the balance of estate assets as directed in the will. In the course of his duties, he will normally provide two reports to the Commissioner of Accounts: An inventory of estate assets and an accounting showing what he did with the estate assets, including the final distribution to the estate beneficiaries. In Virginia, the executor takes an oath to perform faithfully the duties of his office and signs a pledge (bond) to that effect.

The job of the trustee will depend on the terms of the trust. In a typical living trust used to avoid probate, the trustee may perform a function similar to an executor. That is, after the death of grantor of the trust, he will identify and collect the assets of the trust, pay expenses and debts, and distribute the balance of trust assets to the beneficiaries designated in the trust. While he has a duty to report to the trust beneficiaries, he usually is not required to report to the court or to the Commissioner of Accounts. The job of the trustee in this case is similar to that of the executor: it is temporary and administrative in nature.

A trust, however, may involve more than administration of assets after the death of the grantor. For example, trusts may be established in a will or living trust for the benefit of the children of the decedent. Such trusts may last until the beneficiary reaches a certain age or the trust could be established for the life of the beneficiary. In such case the responsibilities of the trustee are for a period of years and often involve the exercise of discretion. If the trust authorizes the trustee to distribute for the “health, support, maintenance and education” (commonly used language) of the beneficiary, the trustee must decide whether the particular needs of the beneficiary rise to the level where a distribution would be appropriate.

The selection of a trustee for an on-going trust where discretion is required should be given careful consideration. Often grantors will look to one child to be trustee for the trusts of one or more of their other children. While family knowledge is an important factor in selecting a trustee, thought should be given to the impact on the relationship between siblings if one is in charge of the funds available to another.

If the trust is of some duration, a sequence of successor trustees should be established in the document if possible. If not, a mechanism should be provided for appointing successor trustees such as selection by the serving trustee; that is, the appointment can be done while the trustee is serving so that the successor is named in case of death or disability of the serving trustee. Also, the beneficiary(ies) can be authorized to select a successor.

In some cases, it is wise to have a “trust advisor.” This is a person whose role is passive but who monitors the actions of the trustee. For example, if the trust beneficiary is young or otherwise vulnerable, the trustee could be required to submit annual reports to the trust advisor.

An advantage of having family members serve in fiduciary capacities is that they will often waive their right to fees. This is especially important where the estate or trust account is relatively small. A fiduciary is entitled to pay from the estate or trust for professional investment advice, tax preparation and legal advice when needed.

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com). He has practiced law in Loudoun County since 1980.

Amy & Dan Smith's Planning for Life: Famous Estate Blunders and How To Avoid Them

These celebrities’ tales are a strong reminder to review your estate plan before it’s too late.

There’s a calm comfort that comes with estate planning: a sense that your family will be taken care of after you pass away (hopefully at a ripe old age). Sadly, it doesn’t always happen that way. Skipping regular estate plan reviews can lead to forgotten details, and these can create confusion and havoc for your family or suck them into a time-consuming court case to iron everything out. Unfortunately, that was the case for these high-profile individuals and their loved ones.

I Got You Babe (And Babe): Back in 1998, after Sonny Bono’s untimely death in a skiing accident, we learned he never wrote a will. And a man claiming to be an illegitimate son attempted to get part of the Bono estate, as did ex-wife Cher, with whom he shared royalties on music they made together. His blended family became a public spectacle at a time of grief and uncertainty.

Avoiding the Oops: Resolve to write a will as soon as possible, and keep your beneficiaries updated. In our opinion, everyone over 18 needs an estate plan that includes a comprehensive will (at the very least) and properly documents your wishes. Remember, life can be unpredictable, especially if you have a complex professional or personal life.

The Girl Without a Ring: Stieg Larson, author of The Girl with the Dragon Tattoo, was devoted to his girlfriend of 32 years. When the Swedish author died without a will, his entire estate was divided between his father and brother in accordance with Swedish law. His beloved was left out, legally speaking.

Avoiding the Oops: Resolve to learn how estate laws affect nontraditional relationships. Learn and understand the laws that govern transfer of property in your chosen state or country, so you can protect the interests of those you love. And don’t presume others will honor your wishes without a written directive. Beyond writing a will, asset titling is especially important when you’re in a “nontraditional” relationship. Legally, your partner may not have the same rights a spouse would.

The Injustice of It All: Former Supreme Court Justice Warren Burger presided over his own will, penning a brief 176-word declaration. But the poorly executed document left his family with more than $450,000 in estate taxes and court fees that could have been avoided.

Avoiding the Oops: Trust a qualified estate planning professional to help you write your will and other estate planning documents. To find one, ask for a referral or visit the American Academy of Estate Planning Attorneys or the National Network of Estate Planning Attorneys. Most of us have limited expertise when it comes to complicated tax and estate planning, and even though dedicated software can help you create the necessary documents, it’s still a good idea to have an estate planning attorney review what you have.

No Laughing Matter: Dark Knight actor Heath Ledger drafted a will naming his siblings and his parents as beneficiaries. Sadly, he didn’t update it after the birth of his daughter, Matilda. When he passed away unexpectedly, there was great confusion about who were the rightful heirs of his estate, and the difficulties played out publicly.

Avoiding the Oops: Resolve to review your plan any time your life changes. Remember that every life event –births, adoptions, disability, deaths, marriages, divorces, even moving-should trigger a review and update your estate documents. If any of these events occur in the life of a beloved beneficiary, take note. That requires another look, too.

Learning from these celebrities’ experiences can help you avoid estate blunders of your own. Resolve to review your documents regularly and put new ones in place when appropriate. Don’t forget to take into account any changes that could impact your plan, including changes in family, personal interests, wealth and tax law. And talk to your financial and estate planning professionals – you may not recognize a change, but your advisors might.

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com). He has practiced law in Loudoun County since 1980.

Amy & Dan Smith's Planning for Life: Five Key Retirement Questions

Beyond asking yourself where you see yourself and even what your lifelong goals are, effective retirement and longevity planning begs some very big questions. Review the points below and consider how housing, transportation and health considerations all play a role in planning for your future.

Where Will You Live?
Whether you’re bound for a dream home or planning to stay put, housing likely will be your biggest expense in retirement. While aging in the comfort of your own home would be ideal, modifications to the home-or your plan-could be necessary as mobility and transportation challenges arise. Points to consider:
Do you want to stay in your home? Will it need to be modified?
What housing options are available to you, and what will they cost?
Would you want to downsize? Relocate to a pedestrian friendly neighborhood?
87 percent of adults age 65+ want to stay in their current home and community as they age. (AARP PPI, “What is Livable? Community preferences of Older Adults,” April 2014)

How Will You Get Around?
It may come as a surprise, but transportation is the second largest expense for individuals older than 65 and accounts for about 15 percent of their annual expenditures, according to the bureau of Labor Statistics. That’s why we make sure to account for it as a part of your long-term financial plan. Points to consider:
How will you get to your favorite places in retirement?
Who will assist you if you can’t drive yourself somewhere?
What transportation options are available in your area?

How Will You Safeguard Your Health?
Your health and your finances are intertwined in complex ways. Most expect Medicare to pay for their healthcare expenses in retirement. But, in reality, Medicare pays only 60 percent of healthcare costs* you will have premiums, copays and deductibles. As you age, healthcare costs can add up. Points to consider:
Do you have an existing condition? What will treatment cost over the long term?
Do you know what costs Medicare will cover?
How will you pay for what Medicare doesn’t?
Have you considered Medigap?

Will You Have Enough?
Giving yourself every opportunity to save enough for a long, fulfilling life requires careful, detailed longevity planning-strategies for saving, investing and taking withdrawals. Making the right Social Security claiming decisions is vital to optimizing your retirement income strategy. Points to consider:
When are you planning to retire?
What sources of income will you have in retirement?
How much income will you need in retirement?

Who Will Take Care of You?
As we all live longer, chances are you may, at some point, provide care for a loved one or receive care yourself. Becoming a caregiver can be not only stressful, but also can have financial consequences if it requires taking time away from work. And long-term care is not covered by Medicare. Points to consider:
Do you understand the full impact of being a caregiver?
How will you get the care you need as you age?
Should you consider long-term care insurance?
70 percent of Americans age 65 in 2014 will need some form of long-term care.
(Department of Health and Human Services)

As you continue planning for your future, your financial advisor can serve as your center point, helping you consider every facet of a long and happy retirement – from healthcare and caregiving to transportation and housing.
*Employee Benefit Research Institute, 2015

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com). He has practiced law in Loudoun County since 1980.

Amy & Dan Smith's Planning for Life: It's Time to Review Your Estate Plan

Beginners and billionaires alike should refresh their knowledge of these basic estate planning terms and concepts.

The word “estate” tends to conjure up images of billionaires and aristocrats, but estate planning is not just for the wealthy. It’s widely believed that estate planning in one form or another is needed by everyone, and it doesn’t need to be sophisticated, complex or costly to help fulfill final wishes and protect assets. Whether you are a prince or a pauper, refreshing on estate planning basics can help make sure your legacy is left the way you intended.

Keep It Simple
An estate is the net worth of a person at any point, including all land, possessions and other assets. A good estate plan passes on your assets to intended recipients in a manner and timing that reflects your wishes.

A will is not sufficient to protect your assets. Wills are outdated as a form of comprehensive estate planning because they only take effect at death- and with life expectancies higher than ever, the challenge of protecting your assets begins much earlier. An estate plan should ensure that the cost of long-term care for a disability won’t devour your assets, which could occur well before a will would come into play.

Your estate plan should protect your assets from nursing homes. This can be achieved by purchasing a long-term care insurance policy. The IRS considers the insurance premiums for “qualified long-term care plans” to be medical expenses, which means it’s possible to deduct them from federal taxes. Many states offer tax breaks as well. And because benefits paid under long-term care insurance policies generally aren’t taxable, long-term care insurance can help avoid a nursing home laying claim to all your assets until Medicaid kicks in. Check with a tax advisor to be sure.

Power of attorney specifies who will represent you in the event that you’re unable to make or communicate decisions about all aspects of your healthcare. Assigning joint power of attorney to two parties allows one to keep the other in check. The “two heads are better than one” approach acts as a safeguard in case one individual becomes unable or unwilling to make important decisions. Common options include selecting two family members, a family member and a lawyer, or a bank or trust company.

A durable power of attorney differs from a traditional power of attorney in that it continues the agency relationship beyond the incapacity of the principal.

The laws for creating a power of attorney vary from state to state, but there are certain general guidelines to follow. If no power of attorney is appointed, the state appoints guardians, conservators or committees, depending upon local state law. Before you or your loved ones sign any documents, however, consult with an attorney concerning all applicable laws and regulations.

While most of us will never have huge fortunes to worry about, we should still pay attention to our own legacies, how we’ll protect them, and how they’ll affect our loved ones. A legacy is not just about leaving what you earned- it’s about leaving what you’ve learned.

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com). He has practiced law in Loudoun County since 1980.

Amy & Dan Smith's Planning for Life: Investing in the Family Stock

Family relationships are usually not considered under the rubric of “investments”.  Yet, the personal gain and loss from family relationships is much more significant than economic return from stocks and bonds.

Taking time out to relate to a person without a self-promoting agenda is counter-cultural, yet such an investment of time in the younger generation can demonstrate an alternative to the current social paradigm, and create a rich, personal reward.  Think of an aunt, uncle or grandparent who stands out in your memory.  I bet the image is not one of a super-producer who accomplished great feats in the marketplace.  Rather, those who touch us most deeply are those who take time to care for us on a personal level.

Consider the grandparent who has some time and a little money to invest.  What would be the return on the investment of bringing family together for a few days at a retreat facility or beach house?  Or taking a grandchild or two for a weekend in D.C. or N.Y.?

Which creates greater value in the long term: A few thousand dollars contributed to a 529 Plan, or the same amount spent for a special outing with parent/grandparent and child? Investing in a memory bank can produce a lifelong return.

As one who has practiced law for four decades, dealing with families and estate planning, I can say without hesitation that the richest clients who come through our offices are those who have invested wisely in developing close personal relationships, especially within the family. Such folks have more wealth than those with huge financial net worth figures.  A legacy of treasured memories is a rich heritage.

As we begin a new year, it might be wise to consider how we might maximize our family ties. Time, energy and even money invested can produce great dividends in the long term.

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com). He has practiced law in Loudoun County since 1980.

Amy & Dan Smith's Planning for Life: Early Returns - How U. S. Markets Reacted to the Presidential Election

On November 8, 2016, Republican candidate Donald J. Trump won a closely contested election for president of the United States.  Late on election night, when it became evident that Trump was likely to win, despite consistently trailing in the polls, foreign markets went into a deep dive. (fn. 1.) Many observers expected a similar reaction when the U.S. stock market opened on November 9, but after an initial drop, the S & P 500, Dow Jones Industrial Average, and NASDAQ rose throughout the day; and all three indexes closed up more than one percent. (fn. 2.) Although this was unexpected after the late-night surprise, it actually continued a two-day surge that began when Democratic Hillary Clinton was expected to win the election. (fn. 3.)

The market was mixed but steady the following day, November 10, with the Dow again up more than one percent, a small increase in the broader S & P 500, and a moderate decline in the NASDAQ which tends to be more volatile due to its inclusion of smaller, technology-driven companies. On November 11, the NASDAQ recovered its loss, the Dow was slightly higher, and the S&P 500 was slightly lower – not unusual after a week of rising stock prices. (fn.4.)

On the other hand, bond prices fell steeply the day after the election, and the yield on the benchmark 10-year Treasury note, which rises as prices fall, jumped more than two percent for the day. This, too, was a surprise, because Treasuries are generally seen as a safe haven in times of uncertainty. But on the day after the election, investors were more interested in selling Treasuries than buying them. (fn. 5.) The Treasury sell-off continued on November 10. (fn. 6.) (Bond markets were closed on Nov. 11 in honor of Veterans Day.)

The conciliatory tone of Trump’s acceptance speech, Clinton’s concession speech, and remarks by President Obama all indicate there will be an orderly transfer of power, which may have helped calm the markets.

Here are some additional implications that might be drawn from the initial market reaction:
First, although the Trump presidency was unexpected and his economic policies are untested, rising stock prices suggest that investors may be optimistic that his promised pro-business agenda could help the upward market trend of the last few years. Investors like clarity and consistency; and the fact that the same party will control the White House and Congress might create a more productive and predictable working relationship. (fn. 7.)  At the same time, fundamental differences between the president-elect and the Republican Congress suggest that any changes may be more measured than originally anticipated. (fn. 8.)

Second, in this initial transition stage, money flowing out of Treasuries suggests that bond investors may see a Trump presidency as leading to higher inflation and higher interest rates, due to a combination of more protective trade policies and heavier government borrowing to fund infrastructure spending, and reduced taxes for individuals and corporations. Declining bond prices might also reflect a belief that the Federal Reserve may raise interest rates at its December meeting, despite the political surprise. (fn. 9.)

Is the U.S. Economy strong enough to withstand any headwinds that arise from a changing administration? That remains to be seen, but fundamental economic indicators have been solid, and overreacting to political events is unwise. The most stable approach in changing times is generally to maintain a well-diversified portfolio using a strategy appropriate for your time frame, personal goals and risk tolerance.

1) CNN Money, Nov. 9, 2016. 2), 5), and 7) MarketWatch, Nov. 9, 2016. 3) and 4) Yahoo! Finance, Nov. 11, 2016. 6) Marketwatch, Nov. 10, 2016. 8) New York Times, Nov. 9, 2016. 9) CNBC.com, Nov. 9, 2016. 

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com). He has practiced law in Loudoun County since 1980.

 

Amy & Dan Smith's Planning for Life: Guns and Estate Planning "Gun Trusts"

Due to the growth of gun ownership in the United States, there is the increased likelihood that estates will include guns. A thorough discussion of the application of federal and state gun laws is not possible in this article. However, responsible estate administrators can unknowingly violate gun laws, leading to “accidental felonies.” Thus, some information may be helpful.

There are two categories of weapons as to which different restrictions apply. The highly regulated category is referred to as “NFA Weapons.” These include short-barreled rifles and shot guns, fully automatic machine guns, silencers and components to build them, any other weapon (eg, pen and cane guns), and destructive devices (eg, grenades and missiles). All transfers of an NFA weapon must be approved by the ATF (Bureau of Alcohol, Tobacco, Firearms and Explosives). Thus, if an executor innocently delivers an NFA weapon (or even loans such a weapon) without ATF approval, he/she has committed a felony which carries possible imprisonment and significant fines.

All NFA weapons must be registered. An unregistered NFA weapon (eg, a German machine gun grandfather brought back from WWII) is contraband and cannot be registered by the estate. The local ATF office should be contacted to arrange for abandonment.

Virtually all household guns, such as hunting rifles, sporting shotguns, revolvers and semi-automatic pistols, are non-NFA weapons. However, regulations still apply and can be traps for the unwary. For example, it is unlawful for certain persons, known collectively as “prohibited persons,” to possess firearms, and it is a felony to transfer a firearm to a person who the transferor knows or “has reasonable cause to believe” is a “prohibited person.” The prohibited person list includes anyone who has ever been convicted of a crime punishable for more than a year; is an unlawful user of or addicted to any controlled substance; has been adjudicated as a mental defective or committed to any mental institution; has ever renounced his/her US citizenship; is subject to a court order restraining the person from harassing, stalking or threatening an intimate partner or child of the intimate partner; or who has been convicted of a misdemeanor crime of domestic violence.

As an example, assume that Dad’s estate contains some non-NFA shotguns which Dad used for hunting. The transfer of these shotguns does not need to be registered with the ATF because they are not NFA weapons. However, the estate administrator, one of Dad’s sons, gives one of the guns to his brother who the administrator has reason to believe is abusing a controlled substance. In such case, the administrator is guilty of a felony.

The Gun Trust is a trust created to purchase and hold firearms. Usually a Gun Trust is used for NFA weapons, although it can hold non-NFA weapons as well. The Gun Trust is designed to prevent inadvertent violation of gun laws. It will include requirements for Trustee conduct, specifically to conform to existing state and federal laws, and will contain directions for the transfer of weapons following the death of the grantor of the trust.

An ATF official stated to your writer recently that, in his estimation, it is likely that only 4-6 percent of all weapons privately possessed in the US are NFA weapons. The vast majority of guns are of the household type. Accordingly, the need for Gun Trusts is rather limited. He also stated that there is a proliferation of Gun Trust forms being downloaded and submitted with applications for transfers of NFA weapons. The forms are the same, even to the point of having the same fictitious beneficiaries. (See this column, Do It Yourself Legal Products – Bargain or Trap, June 1, 2016).

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com). He has practiced law in Loudoun County since 1980.

Amy & Dan Smith's Planning for Life: Are Your Estate and Financial Plans Shock-Proof?

Don’t wait until “what if?” becomes “what is.”

Where will you live as you age?

Think about your housing options now, so you have choices and won’t have to make a hasty decision should an unexpected health event force you to move or modify your home.

Staying Put
Most of us prefer to stay in our homes as we age.  If that sounds like you, plan in advance for modifications you might need to make your home safer or more accessible (e.g. ramps, wider doorways, grab bars.)  Think about whether family members can take you to doctor’s appointments, buy groceries and help with home maintenance.  If you don’t have a support system, you’ll need a plan and budget for transportation, home repairs, and in-home health and personal care services.  Hiring a personal aid, for example, costs an average of $21 per hour.

Sources: Legg Mason, longtermcare.gov

Moving Out
While it may be hard to imagine today, if you can’t stay in your home due to a health event, consider other housing options that could provide more personal, social and healthcare support.

Assisted Living
Among the benefits of an assisted living facility: social connections with other residents and help with everyday tasks like laundry, taking medications and transportation.  Some amenities are included in your rent and some cost extra.  Your monthly rent could be as high as $4,500, depending on the facility and care needed, so tour facilities in your price range and develop a short list.  Ask about additional fees for services like help with dressing if you were to become less mobile.

Nursing Home
If you face a chronic illness or injury that requires 24/7 medical care, your next step may be a nursing home, also called a “long-term” or “skilled-care” facility.  Tour facilities and talk to staff.  Ask residents and their families (if you can) about the level of response and care they receive.

Keep in mind these facilities are often part of a continuing care retirement community, so residents already in a community’s independent or assisted care facility will get first preference on long-term housing.  Ask if there’s a waiting list for non-community retirees.

Continuing Care Retirement Communities
If you’re thinking about the levels of care you may need as you age and prefer to minimize changing neighborhoods and providers, a CCRC may be your best option.  These communities progress in cost and care, from independent apartments to assisted living and finally, long-term care.  Ask whether there are buy-in costs that guarantee you first preference if, for example, you have to move form an independent apartment to the assisted living facility.  Tour each facility within the CCRC and budget accordingly.

Tips
Visit at different times of day, including mealtimes.  Talk to residents and visiting family members.  Review fees for rent and additional services.  Ask about average response time to assist a resident.

Next Steps
Think about if you’ll need transportation or live close enough to walk to shopping and medical facilities.

Learn what fees are required upfront to buy into a continuing care retirement community.

Calculate how much to set aside should you need long-term care.

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com). He has practiced law in Loudoun County since 1980.

Amy & Dan Smith's Planning for Life: What Happens to My Stuff When I Die?

Only in the rarest of circumstances will the state receive the property of a decedent.

Joint Tenancy. If you hold property jointly with another person “with survivorship,” it is presumed that the survivor is entitled to all the property upon the death of the first to die. Typically, a deed or investment account will indicate “joint tenants with right of survivorship.” Joint ownership by a husband and wife with survivorship rights is called a “tenancy by the entireties.” Property owned by two or more people without survivorship is called a tenancy in common. This intention should be clearly stated in the title to avoid conflict upon the death of the first tenant.

A bank account in two or more names is presumed to be the property of the survivor(s) even if “right of survivorship” is not set forth.  TOD or POD. A “Pay on Death” or “Transfer on Death” designation may be added to an account; in which case the designated payee will be entitled to the account balance upon the death of the account holder.

Beneficiary Designations. Many assets routinely have named beneficiaries who will take the balance upon the death of the asset owner. Common examples are life insurance policies, annuities, and retirement plan accounts. If no beneficiary is named, the account will be paid to the estate of the decedent.

If an asset is jointly titled with survivorship or has POD, TOD or a beneficiary designation, a contrary provision in a will or trust will not control.

Trust. If the decedent created a trust during his/her lifetime and transferred assets to the trust during lifetime or at death, then the assets will pass to the beneficiaries named in the trust. (See this post on Trusts, November 17, 2015)

Will. Assets which do not pass by any of the foregoing methods are disposed of in a properly executed will. (See this column Explaining Process of Probate, January 2, 2015)

Intestacy. If none of the foregoing methods of transfer exist, then the decedent’s assets will pass according to a list of beneficiaries set forth in the Virginia Code for persons dying “intestate” (ie, without a will). The surviving spouse of the decedent is entitled to all of the assets unless the decedent is survived by descendants at least one of whom is not descended from the surviving spouse. In that case, the surviving spouse is entitled to one-third of the estate and the decedent’s descendants two-thirds. If there is no surviving spouse, the entire estate is distributed to the decedent’s descendants. If there is no surviving spouse nor descendants of the decedent, then the estate passes to the parents (or surviving parent) of the decedent. If none of the above is surviving, then the estate passes to the brothers and sisters of the decedent or their descendants. If no one in the above categories is surviving, then half to the decedent’s paternal kindred and half to the maternal kindred; if none, then to the kindred of the decedent’s most recent spouse (who predeceased the decedent), provided that the decedent was married to him/her at the time of that spouse’s death. Only if no one in any of the foregoing categories is surviving, does the estate go to the state.

Transporting the Estate. Indications are that you can’t take your estate with you.

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com). He has practiced law in Loudoun County since 1980.