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Dallas Estate Planning Law Blog

Elderly planning and the 4 percent retirement rule

When saving for retirement, many seniors are diligent, but studies show it may be hard to decide how much money one will need to live comfortably during the golden years. When considering elderly planning, there is a simple tool that can help in making wise long-term financial choices. In Texas, taking the time to research the 4 percent rule may help seniors plump up their nest eggs.

In 1994, during a study at Trinity University, the 4 percent rule was introduced. This rule suggests that retirees withdraw only 4 percent from nest eggs during the first year of retirement and adjust this amount each year thereafter. Still, there is no guarantee that the money will last, or that the 4 percent rule will continue to benefit individuals throughout retirement.   

When executor fails to do his or her job -- The Max Hopper case

Texas residents may have heard about the significant verdict coming out of a Dallas probate court regarding the estate of Max Hopper. The multi-billion-dollar verdict was awarded to Mr. Hopper's heirs after they claimed the executor failed to administer the estate appropriately. While a jury may have sided with the deceased family, this case is far from over.

Max Hopper died in 2010. He was an American Airlines executive, known for creating the company's reservations system. Due to the successes in his professional career, when he died, he left behind a sizable estate. Unfortunately, he had failed to put together a will, so his estate was placed in the care of a bank.

Planning for long-term care can be a challenge

When seniors plan for retirement and long-term care, most do not include a plan for debilitating illnesses. Being proactive and building a long-term care plan can ease the financial burden for the primary caregiver, who is usually the spouse. While the plan may never be put into motion, options are limited once an illness hits. In Texas, when devising a long-term plan, it is advisable to include one's family in long-term decision making.

Besides long-term care, it may be in the party's best interest to consult with a financial advisor and an elder care attorney. These experts can devise a plan to protect the assets for the surviving spouse. Considering long-term care insurance is one option. However, it can be expensive, and premiums may increase over time. Additionally, policies vary, and coverage may only last five or six years. 

Medicare mistakes in elderly planning

The annual open enrollment for Medicare is Oct. 15 through Dec. 7, 2017. In order to enroll, one must be 65 or older and meet eligibility requirements. Having the right information from the start may help seniors avoid costly mistakes during elderly planning. In Texas, not evaluating all options when enrolling in Medicare can lead to long-term out-of-pocket costs. 

The prescription part of Medicare, known as Medicare Part D, can change from one year to the next. Prescription drugs may be less expensive depending on the Part D plan chosen. Experts advise shopping wisely and evaluating all medication needs against the different plans offered. Parties can secure the best deals possible when shopping for Medicare Part D to avoid paying high prescription costs over the course of the yearly plan

Estate planning is still necessary if death tax disappears

Congress has released a tax reform plan to eliminate the federal estate tax, also known as the death tax.  Many lawmakers have had this tax on their radars for years, and most consider it another form of double taxation. In Texas, estate planning may still be necessary even without the federal estate tax.

By eliminating the death tax, people will simplify their final plans, and there will be no need for complicated strategies to reduce taxes to the IRS. The most important reason for a shrewd estate plan is to fulfill its purpose and direct assets after death. Setting up estate trusts that safeguard the financial management of minor children and children from different marriages may help ease volatile situations. 

Elderly planning for retirement

Elderly Americans use Social Security as a major source of monthly income. To be eligible for retirement benefits, an applicant must be at least 62 years old and have earned a minimum of 40 working credits. Studies show that in 2017 nearly 1 trillion in benefits will be paid, and forty-two million of that will be paid to retired workers. For elderly planning in Texas, that amounts to an average monthly payment of $1369, the equivalent of one Social Security credit.

Experts agree that there are many misconceptions regarding Social Security, and many believe that the program is broke and funds will soon dry up. In 2016, Social Security ended with a surplus of 2.85 trillion, and reserves are expected to continue growing. Everyone who has paid enough into the system is eligible for retirement benefits. Studies show that one-third of Social Security beneficiaries rely solely on this as their only source of income, and many do not have enough savings to sustain them after retiring.

Acting as a personal representative for aging parents

Mental keenness begins to gradually decline after age 60, but most seniors do not realize that it is even happening. Studies show that as a person ages, the ability to complete complicated tasks weakens, especially with financial management. In Texas, it is important to begin speaking with senior parents about acting as their personal representative sooner rather than later. 

Acting as a personal representative for aging parents can be a daunting task. Experts agree that important financial choices should be addressed while seniors are still able to make sound decisions. If aging parents may not be open to sharing financial information, stress the importance of locating significant documents in the event of incapacitation. Elders tend to lose the ability to trust, and bad decisions and advice from outsiders could soon follow.

Family financial options when estate planning

Estate planning is a shrewd and clever way to provide for a family's financial future. Trusts are an alternative to leaving a will (or may be used in conjunction with one), and offer a broad range of flexible solutions during estate planning. In Texas, revocable trusts, commonly known as living trusts can be made, and managed according to the terms set forth by the creator. Living trusts can also be changed once they are put in place.

Living trusts serve two purposes. If the trust owner should become incapacitated, and cannot manage estate affairs, an elected trustee will step in on the owner's behalf. Revocable trusts are often used as primary estate planning devices, also setting forth final instructions and wishes regarding asset distribution after death. With this type of trust family members can avoid a lengthy and tedious probate process.

Planning ahead for long-term care

Being able to sit back and enjoy life at retirement should be easy. For some, planning for retirement can be a major cause of stress in their lives because they have been misled about how much money to put away for retirement. In Texas, savings plans that will cover long\-term care should be in place long before the paychecks stop. It is important to be informed and to make informed choices.

Most people fall far short in saving enough money for retirement by assuming that Social Security will sustain them. At age 70, the average monthly check would be $1,268, and the yearly household income from Social Security would be $15,216, or slightly above the poverty level. Studies have shown that age-related illness or infirmity will force people out of the workforce well before that age.

Critical mistakes with your inheritance and the IRS

One of the greatest gifts in the world can also be the most costly in terms of taxes and the IRS. If one is the heir of a baby boomer in Texas, chances are his or her benefactor may have been saving a bundle in IRAs and employer sponsored accounts toward an inheritance. Over a lifetime, baby boomers reduced their tax bills using these plans, and an estimated $30 trillion in wealth will be handed down over the next 30 to 40 years.

If one has big plans for the inheritance that has just been received -- maybe a dream vacation, buying that dream car or paying off a home mortgage -- be prepared for IRS sticker shock. Traditional IRAs and 401(k) plans are great for saving since they are tax deferrable and more money is invested as it is earned, but cashing these accounts in after inheriting them will cost plenty. The tax fees alone can be staggering.

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