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NEWSLETTER, November 2012

A newsletter from Law Offices of David A. Bernstein  

When It Comes to Inheritance, Treating Children Equally Not Always the Best Plan

While most parents have the inclination to treat all their children equally when it comes to an inheritance, Personal Family Lawyers® know that this is not always the wise choice.  Here are some scenarios when an unequal distribution may be better:

Children of unequal wealth – If you have one child that is a successful entrepreneur and another that is a social worker, you might want to leave more to the less financially advantaged child.  If that’s the case, be sure to either explain it to them beforehand or write a letter to be opened upon your death explaining your reasoning.  Most children equate money with love, so don’t leave hard feelings behind.

Poor money manager – if you have a child who is poor at managing money and always in debt, you have an alternative to leaving an inheritance outright: a spendthrift trust.  Setting up a trust to disburse certain amounts at predetermined ages, or allocating funds for medical or educational expenses, can protect the inheritance throughout your child’s lifetime.  In this case, it is best to name a trustee who is not a family member.

Bad relationships – if you have a child who has one or more divorces or a string of bad relationships, you should probably consider establishing a trust in this case as well to shield assets from divorce.

Special needs child – a child with special needs should be provided for through a special needs trust, which can be established in a way that protects his or her ability to receive necessary governmental assistance. 

Child with long-term care needs – if you have a child who has a chronic illness and needs expensive medical treatment, you might want to consider purchasing additional life insurance naming that child as beneficiary.  If the child is a minor, you will need to set up a trust as beneficiary of the policy.

Pre-existing loans – if you have made substantial loans to one child and not the others, you may wish to count those as an early inheritance and take them into account before estate assets are distributed. 

Estranged children – in some cases, parents want to disinherit a child.  If you do decide to take this path, you need to be clear that you are intentionally disinheriting the child and not just simply leave them out of your estate plan. 

If you’d like to learn more about creating a personal estate plan, call our office today to schedule a time for us to sit down and talk.

How to Protect Elderly Parents From Financial Abuse

According to a recent study by the Investor Protection Trust and Investor Protection Institute, the top three ways that the elderly could be financially exploited are:

  • Theft of funds or property by family members
  • Theft of funds or property by caregivers
  • Financial scams by strangers

It is estimated that one in nine seniors has been a victim of financial abuse in the past year, so what can you do to protect elderly parents from financial fraud?  Here are some tips:

Seek out a financial abuse prevention seminar in your local area.  Many senior centers and organizations provide these programs, so choose one and go with your parent(s) as an opportunity to do something social with them.

Put your parents’ finances on auto-pilot by enrolling them in direct deposit for Social Security, pension, retirement and investment income.  Set up automatic bill pay for as many bills as possible, and help them pay their bills online.

Check in with them frequently and ask them directly if they have been solicited by anyone who visited or called.  If you live nearby, visit in person.
Some experts advise those with elderly parents who become incapable of handling investments to invest a portion of their retirement income into a low-cost, immediate-fixed or inflation-adjusted annuity from a reputable insurance company.  This will provide a guaranteed lifetime income that cannot be lost to fraud or abuse.

If a parent’s savings are still in their former employer’s 401(k) plan, consider keeping it there.  These plans are strictly regulated for the exclusive benefit of employees, and may yield the best investment deal possible.

If you’d like to learn more about estate planning, call our office today to schedule a time for us to sit down and talk.

Retirement Planning Guidelines for Every Age

You’re never too young or too old to save for retirement; here are some guidelines by age group:

Under 25:  If you graduated from college with debt, you are certainly not alone – the average debt burden is currently $26,500 for 65 percent of college graduates.  Once you are able to get a good job, you should enroll in your employer’s 401(k) or other retirement savings plan and contribute enough to qualify for your employer’s match – usually six percent of salary.

25-40:  You need to be putting away about 10 percent of your income towards retirement, and that should come before you save for a house or the kids’ college fund.

40-54:  You are in your prime earning years and should be able to contribute 15 percent or more to your retirement savings. 

55-70:  Retirement is within sight now, so you may need to start adjusting your asset allocation to risk.  The closer you are to retirement, the less risk you should be taking.  You should also look into long-term care insurance to protect retirement assets.

Over 70:  Your withdrawal rate should generally be no more than four percent of your total portfolio value, not including an emergency reserve fund, to supplement your income from Social Security or pension.  Once you are over 70 ½, you must take the Required Minimum Distribution (RMD) from your traditional IRA and 401(k) every year, which is calculated based on your life expectancy according to IRS Publication 590.

If you’d like to learn more about retirement planning, call our office today to schedule a time for us to sit down and talk.  We normally charge $750 for a Family Wealth Planning Session, but because this planning is so important, I’ve made space for the next two people who mention this article to have a complete planning session at no charge. Call today and mention this article.

 

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