Tuesday, August 26, 2014
Financial planning for retirement has always been an overwhelming prospect; the existing economic landscape makes preparation that much more important in utilizing assets appropriately. There are seven important points everyone should know when it comes to retirement planning:
- Don’t time the market. Markets move in cycles and investors are terrible at correctly predicting market movements. Stay calm and focus on long-term strategy.
- Use risk-appropriate financial vehicles. While eliminating risk isn’t possible, you can manage it through competent retirement planning and an understanding of goals and financial circumstances.
- Invest tax efficiently. Taxes can hurt investment returns, this is why it is important to structure your investments so that you are able to keep what you earn.
- Complete a cash flow analysis. This will identify spending patterns and help ensure you have enough income to support your retirement lifestyle.
- Guarantee your required income. Having income that is not subject to market fluctuations is an important part of a retirement plan. A financial advisor can help you explore options for additional streams of income for life.
- Longevity planning. Longevity planning is about preparing for a comfortable retirement and helps ensure your wealth lasts as long as you need it to.
- Effects of inflation. Inflation is a big issue because retirees can disproportionately be affected by rising prices. Positioning your retirement portfolio to fight inflation is crucial to ensuring adequate income in retirement.
See Carl Edwards, Retirement Planning: Seven Cardinal Rules, My San Antonio, Aug. 26, 2014.
Last weekend’s earthquake in California has spiked an interest in homeowners to get, or improve, their existing insurance coverage. There is much room for improvement in California when it comes to earthquake insurance as some of the costliest earthquakes have occurred in the state. Surprisingly, only ten percent of California homes with homeowners insurance have earthquake coverage, which must be obtained on top of the standard homeowners policy.
While earthquake insurance seems like a must in California, there is a caveat: some important limits on earthquake policies apply to aftershocks. For policies obtained through the California program, coverage goes into effect for aftershocks as of the 16th day a policy is in effect. If a new earthquake occurs just after the policy has been taken out, coverage is not available. “You can’t insure a burning building.”
In California, major insurers through their participation in the California Earthquake Authority (CEA) program typically sell earthquake coverage. The CEA describes itself as a “publicly managed, privately funded, not-for-profit organization.” The authority was established to keep annual premiums as low as possible while also allowing financial stability for the program. Yet this insurance has been a tough sale because many people think it is too expensive and they count on state and federal governments to step in with aid packages. In some cases, this could be a “false hope.”
It is recommended that those who are looking into earthquake insurance should not forgo buying it because of the high deductible. “No earthquake insurance means you’re carrying a 100% deductible!”
See Leslie Scism, Insurance Coverage Likely to Get More Respect After the California Earthquake, The Wall Street Journal, Aug. 25, 2014.
For the last five years, Medicare has been assigning hotel-style ratings to nearly every nursing home in the country. An examination of this rating system has found that many top-ranked nursing homes have been given a seal of approval that is based on incomplete information and can mislead consumers, investors, and others about the home’s conditions.
The Medicare ratings are based in large part on self-reported data by the nursing homes that the government does not verify. The ratings do not take into account entire sets of potentially negative information, including fines and other enforcement actions by state authorities, as well as complaints filed by consumers. For example, the State of California fined a five star rated nursing home $100,000 (highest penalty possible) for causing the death of a woman who was given an overdose of a powerful blood thinner. Furthermore, this nursing home has been the subject of around a dozen lawsuits from patients and their families claiming substandard care.
Widespread acceptance of the ratings system is leading to use beyond the eldercare industry. Beginning this year, Medicare plans to introduce similar five-star ratings for hospitals, dialysis centers and home health care agencies. Federal officials say that while the rating system can be improved, it incentivizes nursing homes to get better. Unfortunately, some nursing homes are not improving, but rather, learning how to game the rating system.
See Katie Thomas, Medicare Star Ratings Allow Nursing Homes to Game the System, The New York Times, Aug. 24, 2014.
Matthew Thomas, 39, published a great American novel about Alzheimer’s—a disease that will impact the lives and estate plans of thousands. Thomas devoted ten years of his life to writing We Are Not Ourselves, much of that time was while he was working as a high-school English teacher. Last year, his book was auctioned for $1 million. The book was subsequently featured as one of the Buzz Books for 2014 at Book Expo America.
The book tells the story of Ed Leary, a college professor in his early 50s, and his wife Eileen, a nurse, put the pieces together during Ed’s devastating disease. The book chronicle’s Ed’s gradual demise, in addition to the emotional and financial impact it has on Eileen and Ed’s son.
Although fiction, this is a story Thomas knows well. He was 19 when his own father was diagnosed with early Alzheimer’s. Thomas says his father’s diagnosis with Alzheimer’s was a “protracted and delayed death sentence.”
See Deborah L. Jacobs, Debut Author Hits the Jackpot with Novel About Alzheimer’s, Forbes, Aug. 25, 2015.
When elderly family members are no longer able to eat, it creates a difficult situation and decision for their families. Difficulties with eating in old age can lead to health problems such as pneumonia and frequent trips to the hospital. A feeding tube is an option considered by many families in such a situation, which can assist with the delivery of nutrients, but can also cause additional medical complications and create distance between the older individual and their loving family. The decision of whether to continue to feed family members near the end of life by hand or feeding tube is a difficult decision.
See Jessica Nutik Zitter, M.D., Food and the Dying Patient, The New York Times, Aug. 21, 2014.
Special thanks to Matthew Bogin (Law Offices of Matthew B. Bogin) for bringing this article to my attention.
A repeal of New Jersey’s inheritance tax is being considered by lawmakers in the state. A change to the current inheritance and estate tax system has been suggested by the state’s governor, Chris Christie. Possibly raising the threshold for the estate tax from the current $675,000, is also being considered.
See, New Jersey Lawmakers Consider Repel of State’s Inheritance Tax, CBS New York, Aug. 24, 2014.
A recent study shows that many families are not discussing estate, retirement, or financial planning decisions between the generations. The 2014 Intra-Family Generational Finance Study reveals that 40% of parents have not had detailed discussions with their children on their plans, preferring to wait until after retirement, but children are often worried that their parents won’t be cared for as they age. Here are three tips on having this important conversation with family members:
- Don’t forget the details, even if they are uncomfortable. Discussing how finances will be handled in retirement and end-of-life decisions can be difficult to discuss, but should not be overshadowed by more general and easier to talk about issues, such as investments and budgets.
- Adult children should keep the conversation a discussion and not a lecture. While adult children may feel the need to fall into the role of advisor, it is important that they respect their parents’ decisions and plans.
- Don’t try to do it all in one day. Families should plan for this type of talk to be an ongoing discussion spread out among multiple conversations.
See Kimberly Palmer, How to Talk Honestly About Money With Your Family, U.S.News, Aug. 20, 2014.
Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.
William D. Pargaman (Saunders, Norval, Pargaman & Atkins, LLP) recently published an article entitled, The Story of the Texas Estates Code, Estate Planning and Community Property Law Journal, Vol. 6 Bk. 2, Summer 2014. Provided below is an excerpt from the introduction of the article:
On January 1, 2014, our new Estates Code replaced Texas’ beloved Probate Code, which has been with us for almost six decades—these changes were enacted into law in 2009, 2011, and 2013, and they went into effect on January 1, 2014. But, the story of the Texas Estates Code goes back more than half a century.
Here’s what this article will attempt to discuss: Texas’ fifty-year-old contienuing statutory revision program; the backstory behind our Probate Code; the reasons why Texas replaced the Probate Code with the Estates Code; the organization of the Estates Code; construction issues related to the replacement of the Probate Code; some of the substantive changes that were included with the enactment of the Estates Code; and a few free resources the reader may find helpful.
Monday, August 25, 2014
Funding for the Affordable Care Act rests in part on a 2.3 percent excise tax on medical device sales. The tax applies to cardiac defibrillators, imaging equipment and an assortment of other equipment sold to medical providers.
Internal Revenue Service assemblage of the tax began in 2013. Last Tuesday, a Treasury Department’s Inspector General report noted that taxpayer reporting on the IRS excise tax form does not account for all applicable medical device sales. Furthermore, the tax agency is struggling to merge data afforded by taxpayers and cannot precisely identify all of the medical device makers that are required to file the form and pay the tax. Treasury auditors estimate that the tax levy should have collected $1.2 billion in excise taxes; however, the IRS has only received $913 million.
See Paul Jenks, IRS Struggles to Collect the Medical Device Excise Tax, Healthopolis, Aug. 20, 2014.
Everyday there is a new headline regarding wills, inheritances, and disinheritances that have gone badly. Recently, the estate of late city resident Geraldine Webber is in dispute to the point that it involves the Portsmouth Police Commission. During a recent hearing, the situation was described as “a disgusting mess.”
A new state law in New Hampshire involving the active role of Portsmouth lawyer Sally Mulhem at Mulhem & Scott PLLC, is designed to prevent future messes of this type. It allows a will to be probated, therefore legal and binding, before a person passes away. “I saw an alarming increase in the number of probate and trust litigation cases. It was just devastating families, and the attorneys’ fees were just consuming whatever estate was there. I didn’t want to see this trend continue. I wanted to do something to get this under control.” said Ms. Mulhem.
Five years ago, Ms. Mulhem began working with the New Hampshire Trust Council to address the situation regarding wills, estates and trusts, and how to address the legal ramifications of trust law. Their efforts produced SB 289, with passage of the measure by the Senate and House. The bill was signed into law on July 11, with a start date of July 1, 2014.
With the new law, a person with what is likely to be a controversial will can opt to hold a hearing before a probate court judge to determine the validity of what they have done. “It allows the person to have a definitive say while they’re still here.”
See Paul Briand, New Granite State Estate Law Designed to End Shenanigans, Seacoast Online, Aug. 25, 2014.