By Gerarda M. Culipher, Esq.[1]
Oh, for the future we’ve planned! Estate planning, and its animating principle, “elder planning,” is equal parts science, art, and law. Legal documents establish and restate your ownership interest, or the controlling power, in all your assets/choices: the Trust, the “Pour Over Will,” the Durable Power of Attorney, the Advance Medical Directive, and the Final Disposition Instructions. These are papers and ink that confer authority and give direction. Properly created and witnessed, these instruments create the “legal authority” to make judgment-calls. But how do we exercise good judgment, once duly given? Get advice.
Enlist the Pros: Accountants, Financial Planners & Insurance Agents
Certainly you’ve heard that Certified Public Accountants (CPAs) or Enrolled Agents (EAs) are terrific help in navigating the tax obligations and implications of planning your Golden Years…in real time, and in futuro.
- Questions like, when must I withdraw in retirement?
- How much ought I withdraw, in a particular year?
- Are, and how are, elder care medical expenses qualifying deductions to federal/state taxes?
- What of interest-income?
- What reduces any potential capital gains liability?
Because tax laws and thresholds can (and do) change with federal tax policy and state legislative priorities, CPAs and EAs are professionally obligated to stay abreast of that changing terrain. Consider these valuable professionals as Compliance Officers for The Responsible Citizen. Importantly, your Trust documents and/or Power of Attorney documents may include language specifically authorizing your Trustee/Agent to retain these kinds of professionals, to best-arm you for success.
Certified Financial Planners (CFPs) can help balance the quantitative (“having enough” in retirement) with the qualitative (“living fully” in retirement) of your Golden Years. They may advise you on how, and when, to structure and expend assets, to meet those goals. Consider these pros as the Financial Life Coaches who help you discern the End-Zone, known as The Good Life. They can build and guide you through the Playbook to get there, pointing out any obstacles and exploring plays around any barriers: incremental moves, within a larger strategy. Football enthusiasts cheer a good “First Down,” almost as much as a Touchdown.
Finally, and sometimes overlooked, are your Insurance Agents. While often a transactional after-thought, insurance can be considered as A Good Mother-Hen: always contemplating potential scenarios, with your best interests and safety, at heart. While only you know your own Risk Tolerance, state law may set base-thresholds for homeowner’s policies.[2] And today’s risk appetite may change, as you advance into an older and wiser tomorrow. If you’ve empowered a family member to act as your Agent for financial matters under a Durable Power of Attorney, make sure they know your preferences for discretionary insurance coverage scope, and check to be sure that you’re DPOA has given them the discretion to make a pivot, as your circumstances change.
The Continuum of Mortality: Decline Leans-In
We are mortal beings. That is the coolest thing about life. Life is the glorious journey it is, only because it will end. But, between perfect health and death, there is a wide decline-continuum. Just ask anyone in the throes of Mid-Life. “It began with my knees…” the former jogger will lament. “I gave up sugar years ago…” a diabetic will report, wistfully. As much as death would seem to be the only serious business to attend to, decline earns thought and plan.
Whether it is Life Insurance, Long-Term Care Insurance, or even Car and Homeowner’s Insurance, you should check all the Policies/Contracts you have, not just to confirm they you’ve named the correct beneficiary, but to ensure the policies are themselves sufficient.
- Confirm who is listed as “the insured” on all homes/property owned (second homes, inherited property that may not be “marital property,” and even primary residences when you pay off your mortgage, should earn another look). State law may govern homeowner’s insurance, such that when an insured dies, insurance companies expand “the insured” to sweep-in the Surviving Spouse, or “the legal representative as to the insured premises.”[3] When a Loved One dies, take the time to update, and review, all policies. Failing to update a homeowner’s policy could result in a claim check inadvertently creating a probate-asset, which you worked so hard to avoid.
- Confirm the insured property policy covers the right things and people. Did you sell/buy a car? Often couples will title cars as owned “jointly” for ease of title-transfer at the Death of one partner, or designate a beneficiary through the DMV[4], but check to be sure the policies will cover if a family member is stepping-in to help an aging Loved-One. “Who is driving? And with what regularity?”
- Did you make major additions/improvements to the home, since you bought the house? Often homeowner’s policies are bundled with the mortgage when you first buy the home, so additions/renovations may have increased the property replacement value. Again, make sure your DPOA Agent knows your Risk Tolerance, so that you are not over-insured or under-insured.
- Confirm that your old Life Insurance Policy (maybe one that you got as part of a job you had 40 or 50 years ago) correctly designates your beneficiaries. Importantly, pay attention to mergers and acquisitions of your insurance company/benefits plan providers. As companies get bought-out over time, “beneficiary designations” may have to be affirmatively restated or updated, under the new/acquiring company’s designation/elections survival policies. You don’t want a policy to fall out of Designation/Trust, simply because the company got bought-out at some point.
Aging in Place is a Dignified Option to Think About
Recent headlines have Americans imagining Medicare Insurance covering in-home care for aging Loved Ones[5] or even tax deductions for in-home family-care.[6] If you are planning to “Age in Place,” yourself, or thinking of having an aging parent move-in, seriously consider whether your homeowner’s policy is sufficient. Take a fresh look at your Declarations page of your policy. Inflationary realities land with a thud, with increased materials/labor costs if there is home damage. And as you consider in-home care, what does your Insurance Company require from you, as you implement your care-plan that includes increased foot-traffic in your home? Do you have a beloved pet in the house? Does it make sense to increase your Medical Payments to Others cap (sometimes called “Coverage F”) on your homeowner’s policy? This is an important question to ask, when one spouse has passed away, and the surviving spouse is forging a new path, alone in their long-time home, or transitioning into a new space.
If the long-time home is held in Trust, are the Trustees or Successor Trustees aware of, or familiar with, the insurance policies and their sufficiency, for a new Widow? If the Trustee is a family member who is located out-of-state, do they have the contact information for your local Insurance Agent, in case there is flood, fire, hurricane, or earthquake which results in damage to the house? Home maintenance previously done by the deceased spouse, may now have to be hired-out. Does the new Widow have to update a Power of Attorney, to name a new family member to help them make those home-maintenance contracts? A good POA Agent or Trustee can also help monitor that the service-provider’s billing practices are sound, and to protect against up-selling. Good estate planning can work as a powerful fraud prevention technique.
Conclusion
They say, “Youth is wasted on The Young.” They could be right. There is something wonderfully obstinate about aging; but don’t let it cost you. The conversation of planning for Decline which generally precedes Death, should be a practical one, not necessarily a hard one. As you consider estate planning, you may see the value in enlisting the help of professionals who guide you through the many pivots, as the Game of Life plays out. Just keep your eye on the ball!
For more information on Trusts, Wills, Powers of Attorney, Advance Medical Directives, and other Estate matters, feel free to call us at 703-865-2525. Or find us on-line at www.DominionLawGroup.net, for more information.
[1] Gerarda M. Culipher, Esq. is a member of the Virginia and DC bars. Legal information, or questions presented about insurance law or tax law, or references to state law should not be construed as providing legal advice to a specific case or family. Every family situation is different, and every state can have varying regulatory schemes.
[2] 14VAC5-342-40. Mandatory property coverages.
[3] 14VAC5-342-130. Policy conditions.
[4] Designating a Beneficiary on a Vehicle Title | Virginia Department of Motor Vehicles
[5] Harris proposes expanding Medicare to cover in-home senior care | AP News
[6] Donald Trump Reveals New Policy: Tax Credit for Family Caregivers
