Beneficiary Designations are Critical to Estate Planning
“Have you checked your beneficiary designation for your retirement account recently?”
It’s important to review the beneficiary designations on accounts like life insurance, IRAs and pensions.
Investopedia says that outdated beneficiary designations can cause problems in its article, “The Importance of Updating Retirement Account Beneficiaries.” There have been many cases of retirement account owners who have been divorced and remarried but failed to update their beneficiary designations.
If you forget, you may find that your designated beneficiary isn’t who you want it to be. That can frequently be the case in the event of a divorce, remarriage or if new children or grandchildren were welcomed to the family since your retirement plan account was started. If you named a charity as your beneficiary years ago, it may no longer exist.
It is good if you are reviewing your estate plan regularly. However, remember that retirement accounts aren’t part of your estate and aren’t governed by the provisions of your will, so it is important to keep these retirement documents updated.
Retirement account beneficiary designations are often neglected: they don’t get the attention they need!
Failing to update beneficiary designations can be very frustrating for the family. They’re the ones who will need to go to court to get a legal determination of the true beneficiary. The judge’s decision may not be what the deceased would have wished.
There can also be an issue, if some children are named as beneficiaries, but the document isn't updated to include those who were born after the initial designation. That’s why you should update your beneficiary designation right after any change in family status—and review it periodically, so they never are out-of-date or incorrect. You should always have a contingency beneficiary.
Another option is to draft customized beneficiary designations to address "what-if" situations.
If you don’t name a beneficiary, the beneficiary may be determined by federal or state law, or by the plan document that governs your retirement accounts. For qualified plans like profit-sharing plans, 401(k)s, and money purchase pension plans, federal regulations automatically designate the spouse of the account owner as the beneficiary. The spouse has to approve of any other designation, and this must be in writing and notarized. If the retirement account owner is single, her estate may be the default beneficiary.
An IRA plan's documents also provide a default designation, if the designated beneficiary predeceases the IRA owner. The default options vary among IRA custodians and trustees. While the default options rid any administrative responsibilities from account owners, they may not reflect their preferences. As a result, account owners should review the plan document and be certain that they update their beneficiary designations regularly.
Many IRA plan documents have default beneficiary options, so if you designate two people as your beneficiaries and one predeceases you, the share that belonged to the deceased beneficiary automatically goes to the surviving beneficiary. If you have a customized designation, you can instruct how that portion would be distributed, instead of having it default to the surviving beneficiary.
Making a proper beneficiary designation is a crucial component of your estate planning. Be sure to talk to a qualified estate planning attorney about your beneficiary designations.
Reference: Investopedia (2018) “The Importance of Updating Retirement Account Beneficiaries”
When Should I Take My Pension?
It was common to get a pension when you worked for a company for 20 or 30 years, then retired with a gold watch and a complete package of retirement benefits.
Investopedia’s recent article, “Choosing How and When to Receive Pension Benefits,” reminds us that times have changed. Pensions have been replaced in large part by 401(k)s or other employer-sponsored savings plans. Those fortunate enough to still have a pension, will make it a large part of their retirement plan. If you have a pension, you’ll have to make some decisions when you are ready to retire.
The first choice is when to begin receiving pension benefits. Some plans offer payout options that like Social Security benefits. You can begin receiving benefits at 62, but you’ll get a smaller amount. If you wait until you’re 65, you’ll receive a bigger payout.
A critical decision is how you will receive your benefit payment. Many pension plans have a lump sum option that lets you cash out of the plan. You’ll also most likely have a few options for monthly payments. The lump sum payout avoids the possibility that your employer may default on your pension.
Most people who take a lump sum roll over the proceeds into an IRA, so they can control the tax consequences of the distribution. If you don’t take a lump sum, or if your plan doesn’t allow for one, you’ll need to decide how to receive your monthly payments. There is typically an option of receiving payments for the rest of your life (a single life annuity) or selecting from a variety of survivor options (joint and survivor annuity) that allow for your beneficiary to continue to receive payments after your death.
If you choose payments for your life only, your monthly income will be higher. The survivorship options result in a reduced payment. If you are married, the IRS requires that the benefit from a qualified retirement plan be paid out as a survivorship option, unless both spouses designate a different form of payment. The best choice for you will depend on your personal circumstances.
When trying to decide, weigh factors such as your age, your spouse’s age, each of your life expectancies, your health, your health history, your spouse’s health and health history, along with the other sources of retirement income that might be available to you or your spouse, after one of you passes. It’s also important to consider whether you have life insurance, the impact the death of one spouse will have on your combined income and the impact on your combined expenses.
If you are lucky enough to have a pension, make sure to get this right. You won’t get a second chance, once you start getting your benefits.
Reference: Investopedia (July 6, 2018) “Choosing How and When to Receive Pension Benefits”
George Michael's Partner Challenging Will that Leaves Him Nothing
According to the late singer George Michael's cousin, Andros Georgiou, the executors of George's estate have contacted all of the individuals and organizations who are named in the former Wham! singer's will.
MSN reports, in the article “George Michael's lover is challenging his will after being left nothing, says cousin,” that Andros told the British newspaper, The Sun, that George Michael didn’t leave anything to Fadi Fawaz, who was Michael’s on-again, off-again partner since 2012. Fawaz also was the one who found Michael dead in bed in his home in the English village of Goring in Oxfordshire on Christmas Day 2016.
Local authorities later announced that the 53-year-old pop star died from dilated cardiomyopathy with myocarditis and fatty liver.
Andros Georgiou says that Fawaz is challenging the will. Michael’s will stipulated that his enormous fortune of approximately $137 million should go to several charities, his sisters Yioda and Melanie and some members of his staff.
"People who worked for George and were loyal to him will be getting small amounts," his cousin Georgiou told The Sun. The newspaper reported that the housekeepers who worked at Michael’s North London and Goring homes are among those mentioned as beneficiaries in his will.
Andros told The Sun that Fawaz received money regularly from George, while the pop star was alive. Fawaz has yet to move out of Michael's home in London's Regent's Park and is in the process of contesting his exclusion from the will.
"Fadi is threatening to go all the way to High Court, but I think the estate will have to settle with him," Andros explained to the British newspaper. "He's been offered £500,000 [roughly $655,000] and I think the estate should pay a couple of million to get rid of him."
George Michael's former partner of 13 years, Kenny Goss, is also said to be contesting his exclusion from the will. However, his issue is reportedly related to funding the Goss-Michael Foundation, the non-profit Dallas art gallery featuring British art collections that he and Michael founded in 2007.
The Sun also reports that George's estate wants to dispose of the late singer’s three homes as quickly as possible.
Reference: MSN (July 29, 2018) “George Michael's lover is challenging his will after being left nothing, says cousin”
Do You Know What’s NOT Covered by Medicare?
Medicare Parts A and B cover a big part of your medical expenses when you turn age 65. Part A is your hospital insurance that helps pay for inpatient hospital stays, stays in skilled nursing facilities, surgery, hospice care and certain home health care. Part B is your medical insurance. It will help pay for doctors' visits, outpatient care, some preventive services, and some medical equipment and supplies. Most people can sign up for Medicare three months before the month they turn 65.
However, Kiplinger’s recent article, “7 Things Medicare Doesn't Cover,” gives us a closer look at what isn't covered by Medicare, as well as some information on supplemental insurance policies and strategies that can help cover the extra costs. That way, you won't wind up with unanticipated medical expenses in retirement.
Prescription Drugs. Medicare doesn’t provide coverage for outpatient prescription drugs. However, you can purchase a Part D prescription-drug policy or a Medicare Advantage plan that covers both medical and drug costs. You can get Part D or Medicare Advantage coverage, when you enroll in Medicare or when you lose other drug coverage, and you can change policies during open enrollment season each fall.
Long-Term Care. One of the biggest potential expenses in retirement is the cost of long-term care. Medicare provides coverage for some skilled nursing services, but not for custodial care. That’s help with bathing, dressing, and other daily living activities. However, you can buy long-term-care insurance or a combination long-term-care and life insurance policy to cover these costs. The earlier in life you make this purchase, the better.
Deductibles and Co-Pays. You’re responsible for deductibles and co-payments on Medicare Part A hospital stays and Part B doctors’ services and outpatient care. This year, you’ll have to pay a Part A deductible of $1,340 before coverage starts, and you’ll also have to pay a portion of the cost of long hospital stays, which is $335 per day for days 61-90 in the hospital, and $670 per day after that. Note that over your lifetime, Medicare will only help pay for a total of 60 days beyond the 90-day limit—known as “lifetime reserve days”—and after that, you’ll pay the entire hospital cost.
Part B typically covers 80% of doctors’ services, lab tests, and x-rays, but you’ll have to pay 20% of the costs after a $183 deductible in 2018. A Medigap (Medicare supplement) policy or Medicare Advantage plan can close the gaps, if you don’t have the supplemental coverage from a retiree health insurance policy. If you buy a Medigap policy within six months of signing up for Medicare Part B, then insurers can’t reject you or charge more because of preexisting conditions.
The Majority of Dental Care. Medicare doesn’t provide coverage for routine dental visits, teeth cleanings, fillings, dentures or most tooth extractions. Some Medicare Advantage plans cover basic cleanings and x-rays, but they usually have an annual coverage cap of about $1,500. You could also get coverage from a separate dental insurance policy or a dental discount plan.
Basic Vision Care. Medicare also generally doesn’t cover routine eye exams or glasses (except for an annual eye exam, if you have diabetes or eyeglasses after having certain kinds of cataract surgery). However, some Medicare Advantage plans provide vision coverage, or you may be able to buy a separate supplemental policy that provides vision care alone or includes both dental and vision care.
Hearing Aids. Medicare doesn’t cover routine hearing exams or hearing aids, but some Medicare Advantage plans cover hearing aids and fitting exams. Some discount programs also provide lower-cost hearing aids. If you save money in an HSA before you enroll in Medicare, you can also use that tax-free for hearing aids and other out-of-pocket expenses.
Medical Care Overseas. Finally, Medicare usually doesn’t cover care you receive while traveling outside of the U.S., except for very limited circumstances (like when you’re on a cruise ship within six hours of a U.S. port). However, Medigap plans C through G, M, and N cover 80% of the cost of emergency care abroad, with a lifetime limit of $50,000. Some Medicare Advantage plans cover emergency care abroad. You could also purchase a travel insurance policy that covers some medical expenses, while you’re outside of the U.S. and may even cover emergency medical evacuation.
Reference: Kiplinger (May 23, 2018) “7 Things Medicare Doesn't Cover”
Do You Have a Ticking Time Bomb in Your Estate Plan?
Blog last updated on June 21, 2021.
When you create an estate plan with an attorney or financial advisor, you will be asked to name several people to act on your behalf. In some instances, these people will act during your lifetime, and in others, they will act upon your death. The people — or person — you choose to name as your executor, agent, or surrogate must be someone you trust and whose actions you can depend on.
It’s not unusual for those filling out an estate plan to name people who are closest to them. While this is completely appropriate in some situations, it is not appropriate in all. An estate plan is a legally binding document, and the people named within should be those you trust implicitly. No one should be named in an estate plan in order to prevent hurt feelings ...ever.
If you have questions about who to name, what roles they play, and other aspects of estate planning, consult with an experienced attorney. Van Dyck Law can provide you with a risk-free consultation when you call 609.580.1044 or contact us online.
Types of Surrogates to Consider During Estate Planning
Let’s take a closer look at some of the major potential surrogates:
Agent: This person will act as your power of attorney. You may be giving this person control of your assets or medical care should you become incapacitated. The person you name as an agent is taking on a large, very important, responsibility.
Agent for Funeral Decisions: The person you name as this agent will have control over your funeral when you pass. If you do not name a specific person in your will or estate plan, New Jersey law gives authority to the following people in this order:
- Legal spouse, civil union partner, or registered domestic partner
- Majority of your surviving children who is older than 18
- Your surviving parent(s)
- Majority of your surviving siblings who is older than 18
- Other relatives
- Other interested parties if there are no relatives
Executor: When you pass away, your executor will manage and distribute your estate. This person will be responsible for carrying out the wishes you have expressed in your will and/or other estate planning documents. An executor is also known as a personal representative.
Financial Account Designees: When you open a joint account with another person, you may select an option known as Transfer on Death (TOD). If you become unable to handle the account due to medical or other circumstances, this person can take over. They also stand to inherit the account upon your death without the need to go through probate court.
Long-term Care Insurance Lapse Designee: If your LTC premiums go unpaid, this person will receive a notification. Think of this as its own type of insurance policy. Should you become unable to make payments for an unforeseen reason, someone will be notified and can make arrangements on your behalf. This can prevent the cancellation of coverage.
Social Security Representative Payee: Typically, the government agency will appoint a family member or friend to manage the benefits of a person who is unable to do so on their own. You can, however, request that a person of your choosing be appointed, and that request will be taken under consideration by Social Security.
Trustee: Should you decide to create a trust, you will need to designate someone to have authority over that trust. This person is known as the trustee. The person you choose will have the ability to manage investments, make distributions, and pay taxes associated with the trust.
It’s important to know that you have the option of naming a single person as a surrogate. You also have the option to name a different person for each need. You may trust someone to handle your medical decisions but not your financial ones, for example, and vice versa.
Before you decide who to name as a surrogate, speak to your estate planning attorney. Knowing what each role entails, how they overlap, and how they may conflict is necessary when creating your estate plan.
We Are Your Source for Accurate Information
At Van Dyck Law, we know that creating an estate plan or trust can be a confusing process. There are dozens of terms and legal concepts that you may not understand well enough to create a plan on your own without making detrimental mistakes. Our team is here to help you construct an estate plan that meets your desires and needs. We will speak to you at length about the outcome you wish for should you become incapacitated or pass away.
We will work with you to ensure that your assets are protected and divided as you see fit. When you trust Van Dyck Law with your estate planning needs, you can rest assured that your plan will be as detailed as necessary, and your desires clearly laid out. There will be no question as to how you want your assets taken care of.
Contact us today at (609) 245-5959 to schedule an appointment. We know that estate planning is an essential part of making sure your final wishes are carried out appropriately. We will take our time to explain your options and write a legally binding plan that is in line with your unique situation.
Why Do a 529 Plan for My Kid?
A 529 college plan is a great way to do something now, to give your kids a chance to move on after high school (and move out) and find their passion.
The Green Bay Press Gazette’s recent article, “Benefits of 529 college savings plans keep giving,” reports that the state of Wisconsin’s 529 plan is called the Edvest College Savings Plan.
Opening an account is simple. It can be done online or by mail, and it takes just $25 to start.
529 plan contributions help you save more money because your investment grows tax deferred, while they’re invested in the plan. You can select your investments or use age-based options that change, as the beneficiary gets closer to college age. The distributions are tax-free, if they’re used for qualified education expenses.
Grandparents are also able to create 529 accounts to benefit their grandchildren. If your grandchild doesn’t need the funds for school, you’re allowed to transfer the beneficiary designation to another grandchild or family member.
There are also estate planning benefits to opening a 529 plan. The annual gift tax exclusion is $15,000 for a single person, and some plans lets you to give up to five years’ worth of gifts at one time. You could gift $75,000 for a single filer and $150,000 for couples.
Education and investing are terrific examples of long-term planning, and whether it’s from parents or grandparents, a 529 plan is a win-win for education and college funding.
Reference: Green Bay Press Gazette (July 13, 2018) “Benefits of 529 college savings plans keep giving”
Three Charged in Major Prize Promotion Scheme Targeting Seniors
Tully Lovisa, Shaun Sullivan, and Lorraine Chalavoutis were recently indicted in New York federal court. They were charged with mail fraud and money laundering for their participation in a fraudulent mass-mailing scheme. Their actions tricked hundreds of thousands of consumers—many of them elderly—into paying at least $30 million in fees for falsely promised cash prizes.
Attorney General Jeff Sessions, Richard P. Donoghue, United States Attorney for the Eastern District of New York, and Peter R. Rendina, Inspector-in-Charge, United States Postal Inspection Service, New York Division (USPIS), announced the indictment, according to a US Department of Justice press release titled “Three Long Island Residents Arrested In Elder Fraud Scheme”
“Earlier this year, when we announced the largest elder fraud sweep in history, we sent a clear message: we will hold perpetrators of elder fraud schemes accountable wherever they are,” Sessions said. “When criminals steal the hard-earned life savings of older Americans, we will respond with all the tools at the Department’s disposal–criminal prosecutions to punish offenders, civil injunctions to shut the schemes down, and asset forfeiture to take back ill-gotten gains. Today’s indictment shows we are following through on this promise, and fraudsters everywhere should take note of it.”
The fake prize-promotion mailings said that recipients could receive a large cash prize, in exchange for paying a modest fee. However, none of them did. The scheme began after the Federal Trade Commission (FTC) sued Lovisa in 2010 for sending deceptive prize-promotion mailings.
In response to that suit, a federal court in California enjoined Lovisa in December 2010 and April 2012 from any involvement with prize-promotion mailings. Nonetheless, she conspired with Sullivan and Chalavoutis to create numerous prize-promotion companies using straw owners and aliases to continue defrauding consumers. Chalavoutis opened bank accounts in the name of straw owners and helped conceal the involvement of Lovisa and Sullivan in controlling the operation.
Prosecutors also claim that Lovisa submitted a false compliance report to the FTC, in which he claimed not to be involved in prize-promotion mailings. The additional wire fraud and money laundering charges involve Lovisa’s further deception of the FTC concerning the court-ordered sale of a house he owned in Nevada. According to the indictment, Lovisa arranged a sham sale of the house for $155,500 in 2012 that allowed him to maintain control of it and only give the FTC proceeds of that sale. Lovisa subsequently sold the house in April 2015 for $540,000.
If convicted, the defendants face up to 20 years’ imprisonment for mail fraud, wire fraud, and conspiracy. Each charge also carries a statutory maximum fine of $250,000 or twice the gross gain or gross loss from the offense.
Reference: US Department of Justice (July 11, 2018) “Three Long Island Residents Arrested In Elder Fraud Scheme”
David Cassidy’s Son Now Looks to Inherit Much More Than Expected
According to court documents obtained by The Blast, the late actor and musician David Cassidy left his son Beau the bulk of his estate.
That estate was originally valued at just $150,000, minus some substantial debts. However, Cassidy’s estate is now estimated at about $230,000, after debt expenses are paid. However, there’s more.
People’s recent article, “David Cassidy's Son to Receive Upwards of $1.68 Million—More Than 10 Times Initial Estimate,” reports that Cassidy had a retirement plan which has already paid out $450,000 to Beau. His son will also receive $1 million in life insurance policy proceeds, since he was the sole beneficiary.
When it’s all added up, Beau Cassidy will inherit roughly $1.68 million—which is more than 10 times what the sum was initially reported to be his when his father, the former Partridge Family star, passed away at the age of 67 from organ failure in late 2017.
His daughter Katie Cassidy was omitted from his will. David claimed he was no more than a biological father to her. Cassidy told People several months before his death, “I’ve never had a relationship with her. I wasn’t her father. I was her biological father but I didn’t raise her.”
Nonetheless, Katie was one of the family members who joined to mourn his loss, after he succumbed to his struggles with liver and kidney failure. She credits him with giving her valuable advice about spending a life in the limelight.
“He left me with really great advice. He was like: ‘Don’t ever stop going to class. That’s where you should put your money,’” she told People. “And that’s what I do, and I’ve been able to go from nothing to where I am today and it’s built confidence and self-esteem.”
The actress also admitted to being quite impacted by her father’s final words, writing on Twitter, “My father’s last words were ‘So much wasted time.’ This will be a daily reminder for me to share my gratitude with those I love as to never waste another minute.”
Reference: People (July 18, 2018) “David Cassidy's Son to Receive Upwards of $1.68 Million — More Than 10 Times Initial Estimate”
Where is the Worst Place to Retire?
"High taxes and cost of living make these states undesirable for retirees, according to Bankrate.com.”A state’s taxes and cost of living are the most critical factors when deciding where to retire, according to a new survey by Bankrate.com. Think Advisor recently listed the “12 Worst States for Retirement: 2018.”
The least desirable states for retirement typically had poor ratings in the categories for cost of living and taxes, and were also weighed down by low scores in other categories. Bankrate.com created its rankings by looking at seven categories of interest to retirees and weighted those rankings based on the importance given to them by respondents to the firm’s 2017 survey. The categories were:
- cost of living (20%);
- taxes (20%);
- health care quality (15%);
- weather (15%);
- crime (10%);
- cultural vitality (10%); and
- well-being (10%).
The last category, well-being, took into account how people felt about their community, friends, health and general purpose. One Bankrate.com analyst remarked that it’s important to have strong relationships with friends and your spouse and spend your money on leisure activities that bring you joy, citing recent research.
The seven factors were averaged, so some states that were down in the rankings had low crime, well-being, health care and cultural quality, even though they scored well on cost of living. Other states with high scores on cultural quality and crime may have done very poorly on cost of living and taxes.
Here's the list of the 12 worst states for retirement:
- South Carolina
- New Mexico
- New York
Reference: Think Advisor (July 17, 2018) “12 Worst States for Retirement: 2018”
Glen Campbell’s Estate “Paralyzed” by Probate Court
“Warning that federal deadlines are approaching, the interim administrator of the estate of famed singer Glen Campbell is asking a judge for additional powers, so he can hire accountants and other experts to estimate the future value of royalties and other assets.”
In a motion filed in Davidson Probate Court in Nashville, Tennessee, the attorneys for Stanley B. Schneider, Glen Campbell's longtime publicist, complained that although the estate was filed nine months ago, administrative duties have been stifled by the limited powers set by the court in February, according to an article in The Tennessean, “Glen Campbell estate 'paralyzed' as will contest looms, lawyers say.”
The petition alleges that Schneider's duties are now curtailed to only collecting money paid to the estate and making mandatory non-discretionary payments. It asks Probate Judge David "Randy" Kennedy to schedule a hearing later this summer to rule on the expanded duties request.
Glen Campbell died on August 8, 2017 at age 81, after a long battle with Alzheimer's disease.
Schneider, the court-appointed administrator for his estate, recently arrived at a partial preliminary estimate. However, it is only a small fraction of the previous estimates of its value.
He claims that the estimated estate assets are roughly $410,000. Earlier estimates of Campbell's total estate value were near $50 million.
The estimate excludes future income rights from royalties, and notes that an appraisal is required.
Three of Campbell's children have served notice that they are contesting the will, which specifically excludes them from any estate assets. His will names his wife Kimberly as executor. She and his five other children are listed as beneficiaries.
This tangled estate battle may not conclude for a long time. Taxes need to be paid, assets need to be valuated, but the executor now lacks the power to hire or pay the assessors and accountants who would normally perform these duties.
The petition also asks the court to order those contesting the will to certify the will contest, so he has an idea of how long he will be needed to serve as executor.
Reference: The Tennessean (July 2, 2018) “Glen Campbell estate 'paralyzed' as will contest looms, lawyers say”