Austin – 512-480-8828 | *Georgetown – 512-869-1435 | *Highland Lakes – 830-598-1700 | *San Antonio – 210-510-4143 | *All other areas – 877-545-8828 | *By Appointment Only | Principal Office: 1601 Rio Grande, Suite 550, Austin, Texas 78701
The Wiewel Law Firm, an estate planning law firm in Austin, Texas
The Peace of Mind People®

Category: Coronavirus

estate planning for a second marriage

Do You Need a DNR in Your Estate Plan?

The rise of COVID 19 has caused many people to consider estate planning, and that is a good thing. When the discussion arrives at end of life decisions, the subject of a DNR comes up. Do you need a DNR in your estate plan? Forbes’s article entitled “Should “Do Not Resuscitate” Be Part Of Your Estate Plan?” explains the difference between a health care proxy and a DNR.

A health care proxy is a legal document that lets you name an agent to make health care decisions for you. It is used if you’re unable to make those decisions for yourself. When you were again able to communicate, you’d go back to making your decisions for yourself. The ability to create a health care proxy is governed by your state’s laws. Every state’s laws are different.

Ask an experienced estate planning attorney about a DNR and how to comply with your state’s law in creating these directives. He or she will know about health care institutions and whether they will give authority to the documents you created. If they won’t, your named agent would have to go to court to enforce them.

You can also supplement your state’s directives with additional guidance.

Some states’ directives require a set series of instructions for your agent in your estate plan regarding your DNR. For instance, it may include questions as to whether you want life sustaining treatment and medically administered nutrition and hydration. Other states contain language that is broader. They allow the agent more latitude to decide end-of-life decisions. This language usually includes the intention that you want to be taken off life support, if you have a terminal illness or injury and your death is imminent.

A DNR is a medical order informing health care workers that they are not to revive you. It is a document that you put in place with your physician. Some states have also adopted MOLST forms (Medical Orders for Life Sustaining Treatment) to address other situations, like intubation, ventilation and dialysis. These documents require a thorough discussion between the patient and the health care provider. They are typically part of end of life care, when a person has an advanced stage terminal illness.

If you’re relatively healthy, you want to be treated – and resuscitated – if you have a heart attack. There may be a time when you need a DNR, but most likely it’s not now. If and when that time comes, you’ll need to have a talk with your doctor and estate planning attorney about a DNR, and whether you should include it in your estate plan.

However, you should speak with your estate planning attorney about your health care proxy, especially if you don’t have one. Whether it’s during the coronavirus pandemic or not, a health care proxy is a critical part of a complete estate plan. To learn more about other important documents to include in your planning, such as a Power of Attorney or Guardianship, please read our previous posts.

Reference: Forbes (May 28, 2020) “Should “Do Not Resuscitate” Be Part Of Your Estate Plan?”

 

estate planning for a second marriage

Perfect Storm for the Financial Abuse of Seniors

The extended isolation and loneliness during the coronavirus pandemic is creating the perfect storm for the financial abuse of seniors, who are unable to visit with family members and friends, reports Fredericksburg Today in the article “SCC urges awareness of investment fraud among seniors due to increased pandemic isolation.” The unprecedented need to forgo socializing makes seniors who are already at risk, even more vulnerable.

In the past, scammers would deliberately strike during a health crisis or after the death of a loved one. By gathering data from obituaries and social media, even establishing relationships with support and social groups, scammers can work their way into seniors’ lives.

Social distancing and the isolation necessary to protect against the spread of the coronavirus has left many seniors vulnerable to people posing as their new friends. The perpetrators may not just be strangers: family members are often the ones who exploit the elderly. The pandemic has also led to changes in procedures in care facilities, which can lead to increased confusion and dependence for the elderly, who do not always do well with changes.

Here are a few key markers for senior financial abuse:

  • A new friend or caregiver who is overly protective and has gotten the person to surrender control of various aspects of their life, including but not limited to finances.
  • Fear or a sudden change in how they feel towards family members and/or friends.
  • A reluctance to discuss financial matters, especially if they say the new friend told them not to talk about their money with others.
  • Sudden changes in spending habits, or unexplained changes to wills, new trustees, or changes to beneficiary designations.
  • Large checks made out to cash, or the disappearance of assets.
  • Signatures on checks or estate planning documents that appear different than past signatures.

Not being able to visit in person makes it harder for family members to discern what is happening.  However, there are a few steps that can be taken by concerned family members. Stay in touch with the family member, by phone, video calls, texts or any means possible. Remind loved ones that scammers are always looking for an opportunity and may try to exploit them during the pandemic.

Every community has resources that can help, if senior financial abuse is a concern. An elder law estate planning attorney will be able to direct concerned family members or friends to local resources to protect their loved ones.

Reference: Fredericksburg Today (June 20, 2020) “SCC urges awareness of investment fraud among seniors due to increased pandemic isolation”

 

 

estate planning for a second marriage

Why You Need an Advance Directive Right Now

The number of Americans who have died in the last few months because of COVID-19 is staggering, reports Inside Indiana Business in an article that advises readers to “Get Your Advance Directives in Place Now.”  This is why you need an advance directive right now. Just talking with family members about your wishes is not enough. You’ll need to put the proper legal documents in place. It’s not that hard, and it is necessary.

Only one in three Americans has completed any kind of advance directive. Many younger adults don’t feel the need to complete these documents, but there have been many examples that prove this is the wrong approach. Both Terri Schiavo and Karen Ann Quinlan were only in their twenties when they were not able to make their wishes known. Family members fought in and out of court for years.

The clinical realities of COVID-19 make it hard for healthcare workers to determine their patient’s wishes. Visitors are not permitted, and staff members are overwhelmed with patients. COVID-19 respiratory symptoms come on rapidly in many cases, making it impossible to convey end-of-life wishes.

Advance directives are the written instructions regarding health care decisions, if you are not able to communicate your wishes. They must be in compliance with your state’s laws. The most common types of advance care directives are the durable power of attorney for health care and the living will.

A durable power of attorney for health care names a person, usually a spouse or family member, to be a health care agent. You may also name alternative agents. This person will be able to make decisions about your health care on your behalf, so be sure they know what your wishes are.

A living will is the document that states your wishes about the type of care you do or don’t want to receive. Living wills typically concern treatments like CPR (cardiopulmonary resuscitation), breathing machines (ventilators), dialysis, feeding tubes and certain treatments, like the use of an IV (intravenous, meaning medicine delivered directly into the bloodstream).

Studies show that people who have properly executed advance directives are more likely to get care that reflects their stated preferences.

Traditional documents will cover most health situations. However, the specific symptoms of COVID-19 may require you to reconsider opinions on certain treatments. Many COVID-19 patients need ventilators to breathe and do subsequently recover. If in the past you wanted to refuse being put on a ventilator, this may cause you to reconsider.

Almost all states require notarization and/or witnesses for advance directives and other estate planning documents to be valid. Many states, including Indiana and New York, now allow for remote notarization.

Talk with your estate planning attorney about putting all of your estate planning documents in order.

Reference: Inside Indiana Business (June 8, 2020) “Get Your Advance Directives in Place Now”

 

estate planning for a second marriage

Using Retirement Funds in a Financial Crisis

For generations, the tax code has been a public policy tool, used to encourage people to save for retirement and what used to be called “old age.” However, the coronavirus pandemic has caused many households to begin using retirement funds in a financial crisis. Lawmakers have responded by making it easier to tap these accounts. The article “Should You Tap Retirement Funds in a Crisis? Increasingly, People Say Yes” from The Wall Street Journal asks if this is really a good idea.

This shift in thinking actually coincides with trends that began to emerge before the last recession. People were living and working longer. Unemployment and career changes later in life were becoming more commonplace, and fewer and fewer people devoted four decades to working for a single employer, before retiring with an employer-funded pension.

For those who have been affected by the economic downturns of the coronavirus, withdrawals up to $100,000 from retirement savings accounts are now allowed, with no early-withdrawal penalty. That includes IRAs (Individual Retirement Accounts) or employment-linked 401(k) plans. In addition, $100,000 may be borrowed from 401(k) plans.

Americans are not alone in this. Australia and Malaysia are also allowing citizens to take money from retirement accounts.

Lawmakers are hoping that by using retirement funds now, it may help households prevent foreclosures, evictions and bankruptcies, with less of an impact on government spending. With trillions in retirement accounts in the U.S., these accounts are where legislators frequently look when resources are threatened.

However, there’s a tradeoff. If you take out money from accounts that have lost value because of the market’s volatility, those losses are not likely to be recouped. And if money is taken out and not replaced when the world returns to work, there will be less money during retirement. Not only will you miss out on the money you took out, but on the return, it might have made through years of tax-advantaged investments.

The danger of using retirement funds in a financial crisis is that if these accounts are widely seen as accessible and necessary now, a return to saving for retirement or the possibility of putting money back into these accounts when the economy returns to normal may not happen.

IRA and 401(k) accounts began to supplant pensions in the 1970s as a way to encourage people to save for retirement, by deferring income tax on money that was saved. By the end of 2019, IRAs and 401(k) types of accounts held about $20 trillion in the US.

Boston College’s Center for Retirement Research has estimated that even before the coronavirus, early withdrawals were reducing retirement accounts by a quarter over 30 years, taking into account the lost returns on savings that were no longer in the accounts. For many people, taking retirement funds now may be their only choice, but the risk to their financial future and retirement is very real.

Reference: The Wall Street Journal (June 4, 2020) “Should You Tap Retirement Funds in a Crisis? Increasingly, People Say Yes”

 

estate planning for a second marriage

What You Need to Know about Drafting Your Will

A last will and testament is just one of the legal documents that you should have in place to help your loved ones know what your wishes are, if you can’t say so yourself, advises CNBC’s recent article entitled, “Here’s what you need to know about creating a will.” In this pandemic, the coronavirus may have you thinking more about your mortality. Here’s what you need to know about drafting your will.

Despite COVID-19, it’s important to ponder what would happen to your bank accounts, your home, your belongings or even your minor children, if you’re no longer here. You should prepare a will, if you don’t already have one. It is also important to update your will, if it’s been written.

If you don’t have a valid will, your property will pass on to your heirs by law. These individuals may or may not be who you would have provided for in a will. If you pass away with no will —dying intestate — a state court decides who gets your assets and, if you have children, a judge says who will care for them. As a result, if you have an unmarried partner or a favorite charity but have no estate plan, your assets may not go to them.

The courts will typically pass on assets to your closest blood relatives, despite the fact that it wouldn’t have been your first choice.

Your will is just one part of a complete estate plan. Putting a plan in place for your assets helps ensure that at your death, your wishes will be carried out and that family fights and hurt feelings don’t make for destroyed relationships.

There are some assets that pass outside of the will, such as retirement accounts, 401(k) plans, pensions, IRAs and life insurance policies.

Therefore, the individual designated as beneficiary on those accounts will receive the money, despite any directions to the contrary in your will. If there’s no beneficiary is listed on those accounts, or the beneficiary has already passed away, the assets automatically go into probate—the process by which all of your debt is paid off and then the remaining assets are distributed to heirs.

If you own a home, be certain that you know the way in which it should be titled. This will help it end up with those you intend, since laws vary from state to state.

Ask an estate planning attorney in your area — to ensure familiarity with state laws—for help learning what you need to know about drafting your will and the rest of your estate plan.

Reference: CNBC (June 1, 2020) “Here’s what you need to know about creating a will”

 

estate planning for a second marriage

Utilizing the SECURE and CARES Acts?

Are you utilizing the SECURE and CARES Acts in the best way possible? The SECURE Act made a number of changes to IRAs, effective January 1, 2020. It was followed by the CARES Act, effective March 27, 2020, which brought even more changes. A recent article from the Milwaukee Business Journal, titled “IRA planning tips for changes associated with the SECURE and CARES acts,” explains what account owners need to know.

Setting Every Community Up for Retirement (SECURE) Act

The age when you have to take your RMD increased from 70½ to 72, if you turned 70½ on or before December 31, 2019. Younger than 70½ before 2020? You still must take your RMDs. But, if you can, consider deferring any distributions from your RMD, until you must. This gives your IRA a chance to rebound, rather than locking in any losses from the current market.

Beneficiary rules changed. The “stretch” feature of the IRA was eliminated. Any non-spousal beneficiary of an IRA owner who dies after Dec. 31, 2019, must take the entire amount of the IRA within 10 years after the date of death. The exceptions are those who fall into the “Eligible Designated Beneficiary” category. That includes the surviving spouse, a child under age 18, a disabled or chronically ill beneficiary, or a beneficiary who is not more than ten years younger than the IRA owner. The Eligible Designated Beneficiary can take distributions over their life expectancy, starting in the year after the death of the IRA holder. If your estate plan intended any IRA to be paid to a trust, the trust may include a “conduit IRA” provision. This may not work under the new rules. Talk with your estate planning attorney.

IRA contributions can be made at any age, as long as there is earned income. If you have earned income and are 70 or 71, consider continuing to contribute to a Roth IRA. These assets grow tax free and qualified withdrawals are also tax free. If you plan on making Qualified Charitable Distributions (QCD), you’ll be able to use that contribution (up to $100,000 per year) from the IRA to offset any RMDs for the year and not be treated as a taxable distribution.

Coronavirus Aid, Relief and Economic Security (CARES) Act

The deadline for contributions for traditional or Roth IRAs this year is July 15, 2020. The 2019 limit is $6,000 if you are younger than 50 and $7,000 if you are 50 and older.

RMDs have been waived for 2020. This applies to life expectancy payments. It may be possible to “undo” an RMD, if it meets these qualifications:

  • The RMD must have been taken between February 1—May 15 and must be recontributed or rolled over prior to July 15.
  • RMDs taken in January or after May 15 are not eligible.
  • Only one rollover per person is permitted within the last 12 months.
  • Life expectancy payments may not be rolled over.

Individuals impacted by coronavirus may be permitted to take out $100,000 from an IRA with no penalties. They are eligible if they have:

  • Been diagnosed with SARS-Cov-2 or COVID-19
  • A spouse or dependent has been diagnosed
  • Have experienced adverse consequences as a result of being quarantined, furloughed or laid off or having work hours reduced due to the virus, are unable to work because of a lack of child care, closed or reduced hours of a business owned or operated by the individual or due to other factors, as determined by the Secretary of the Treasury.
  • Note that these distributions are still taxable, but the income taxes can be spread ratably over a three-year period and are not subject to the 10% early distribution penalty.

Keep careful records, as it is not yet known how any of these distributions/redistributions will be accounted for through tax reporting. All of these tips will allow you to utilize the SECURE and CARE Acts effectively.

Reference: Milwaukee Business Journal (June 1, 2020) “IRA planning tips for changes associated with the SECURE and CARES acts”

 

estate planning for a second marriage

Would an Early Retirement and Early Social Security Be Smart?

For older employees who are laid off as a result of the pandemic, the idea of an early retirement and taking Social Security benefits early may seem like the best or only way forward. However, cautions Forbes in the article “Should You Take Social Security Earlier Than Planned If You’re Laid Off Due to COVID-19?,” this could be a big mistake with long-term repercussions.

In the recession that began in 2008, there were very few jobs for older workers. As a result, many had no choice but to take Social Security early. The problem is that taking benefits early means a smaller benefit.

In 2009, one year after the market took a nosedive, as many as 42.4 percent of 62-year-olds signed up for Social Security benefits. By comparison, in 2008, the number of 62-year-olds who took Social Security benefits was 37.6 percent.

You can start taking Social Security early and then stop it later. However, there are other options for those who are strapped for cash.

There is a new tool from the IRS that allows taxpayers to update their direct deposit information to get their stimulus payment faster and track when to expect it. There is also a separate tool for non-tax filers.

Apply for unemployment insurance. Yes, the online system is coping with huge demand, so it is going to take more than a little effort and patience. However, unemployment insurance is there for this very same purpose. Part of the economic stimulus package extends benefits to gig workers, freelancers and the self-employed, who are not usually eligible for unemployment.

Consider asking a family member for a loan, or a gift. Any individual is allowed to give someone else up to $15,000 a year with no tax consequences. Gifts that are larger require a gift tax return, but no tax is due. The amount is simply counted against the amount that any one person can give tax free during their lifetime. That amount is now over $11 million. By law, you can accept a loan from a family member up to $10,000 with no paperwork. After that amount, you’ll need a written loan agreement that states that interest will be charged – at least the minimum AFR—Applicable Federal Rate. An estate planning attorney can help you with this.

Tap retirement accounts—gently. The stimulus package eases the rules around retirement account loans and withdrawals for people who have been impacted by the COVID-19 downturn. The 10% penalty for early withdrawals before age 59½ has been waived for 2020.

If you must take Social Security, you can do so starting at age 62. In normal times, the advice is to tap retirement accounts before taking Social Security, so that your benefits can continue to grow. The return on Social Security continues to be higher than equities, so this is still good advice.

Reference: Forbes (April 15, 2020) “Should You Take Social Security Earlier Than Planned If You’re Laid Off Due to COVID-19?”

 

estate planning for a second marriage

Does Your Estate Plan Need a Will or a Trust—Or Both?

Having a structure in place that clearly directs who is in charge and who gets what assets, gives most people a sense of relief about their estate plan. It’s important to understand how a will works, how a trust works and when to use each of these planning tools, reports the article “Revocable trust vs. will: A guide to estate planning in the age of coronavirus” from Bankrate. In many cases, using both achieves the ultimate goal of protecting the family assets and their privacy.

The will process is more complex than its typical portrayal in film or fiction. The will directs who is to receive the property of the deceased. Without a will, property may be distributed by the courts, following the “intestate succession” law of the state. That’s usually the next of kin—not always who you want to inherit your estate.

If property is owned jointly, then it passes to the surviving owner. Accounts and assets with a named beneficiary go directly to that beneficiary. Any assets held in a trust are subject to the directions in the trust. That is one reason to check all accounts you own and make sure they have two named beneficiaries—primary and contingent. That applies to retirement and investment accounts, as well as life insurance policies.

The probate court appoints an executor— who should be chosen by the decedent and nominated in the will—to carry out the directions in the will, pay any outstanding debts, take care of taxes and oversee the distribution of assets. The process of administering the will can be lengthy, depending upon the size and the complexity of the estate. During probate, the will becomes a public document. Predatory creditors are able to see the will, including the amount of assets and their distribution. In many jurisdictions, there are court fees associated with probate that can take a bite (or a nibble) out of the estate.

Trusts are used to circumvent some of the issues created when assets are passed via a will. Trusts are legal structures that provide protection for assets. The assets in a trust do not belong to the individual, they belong to the trust.  Therefore, they are not subject to probate. When the trust is created, a trustee is named whose job it is to manage the affairs of the trust. A successor trustee is named to manage the trust, if the trustee cannot or will not serve.

The revocable trust is used to take assets out of the estate, while allowing the asset owner to maintain control. Assets can be moved in or out of the trust, or the trust can be dissolved, and the assets taken back. However, there are no tax benefits, since the trust owner is the trust maker, the trustee, and the beneficiary, as long as the owner is alive. On the owner’s passing, the designated successor trustee takes over.

With an irrevocable trust, there are significant tax benefits. However, there is also a loss of control of the assets.

Trusts do cost more to establish than wills, but they offer a number of advantages. The use of a trust means that less or none of your assets will go through probate, speeding up the distribution process. Trusts also protect the family’s privacy, since the details in the trusts do not become part of the public record. There is less involvement by the court in distributing assets, so fees may be lower.

Speak with an estate planning attorney about how trusts may play a useful part in your estate plan and for passing wealth down to multiple generations.

Reference: Bankrate (April 17, 2020) “Revocable trust vs. will: A guide to estate planning in the age of coronavirus”

Suggested Key Terms:

estate planning for a second marriage

Coronavirus Stimulus Allows Retirees to Tap Funds Early, With Little or No Penalties

For a limited time, Americans will now be able to withdraw money from tax-deferred accounts without penalties, under the Coronavirus Stimulus law. Rules on taking loans from 401(k)s will also be loosened up, and some retirees will be able to avoid Required Minimum Distributions (RMDs) that otherwise would have been costly, says the article “Coronavirus stimulus lets struggling Americans tap retirement accounts early” from the Los Angeles Times.

In some cases, these changes reflect what has been done for retirement savers in previous disasters. However, for the most part, these are more intense than in other events. The chief government affairs officer of the American Retirement Association, Will Hansen, says that we are now in uncharted territory as a result of the Covid-19 pandemic. The numbers of people filing for unemployment make it likely that many people will be tapping their retirement accounts.

One provision in the bill would allow investors of any age to take as much as $100,000 from their retirement accounts without any early withdrawal penalties. If the money is put back in the account within three years, there won’t be any taxes due. If the money is not put back, taxes can be paid over the course of three years. The law says that the money must be a “coronavirus-related distribution,” but the rules are loose.

People who test positive for the virus, along with anyone who experiences adverse financial consequences as a result of the pandemic, including being unable to find work or childcare, are permitted to make these withdrawals.

The bill also makes it easier to borrow money from 401(k) accounts, raising the limit on these loans from $50,000 to $100,000. The payment dates for any loans due in 2020 are extended for a year.

Retirees in their early 70s were previously required to start taking money out of tax-deferred accounts and start paying taxes on those distributions. The bill also waives these rules.

U.S. individual retirement accounts held nearly $20 trillion in assets at the end of 2019. While those amounts have certainly dropped due to market volatility, Americans still hold a lot of money in retirement accounts.

However, pre- and post-retirees need to think carefully about withdrawing large sums of money now. For pre-retirees, this should only be a last resort. Some professionals think the 401(k)-loan amount is too high and that people will jump to take out too much money, which will never find its way back.

According to a U.S. Government Accountability Office report from 2019, Americans ages 25-55 take approximately $69 billion a year from their retirement accounts. Once the money is gone, it’s not able to earn future tax-deferred returns.

Reference: Los Angeles Times (March 27, 2020) “Coronavirus stimulus lets struggling Americans tap retirement accounts early”

 

estate planning for a second marriage

Requests for Estate Plans Reflect Fears about Coronavirus

Estate planning lawyers have always known that estate planning is not about “if,” but about “when.” The current health pandemic has given many people a wake-up call. They realize there’s no time to procrastinate, reports the article “Surge on wills: Fearing death by coronavirus, people ask lawyers to write their last wishes” from InsuranceNews.net. Legal professionals urge everyone, not just the elderly or the wealthy, to put their end-of-life plans in writing.

The last time estate planning attorneys saw this type of surge was in 2012, when wealthy people were worried that Congress was about to lower the threshold of the estate tax. Today, everyone is worried.

Top priorities are creating a living will stating your wishes if you become incapacitated, designating a surrogate or a proxy to make medical decisions on your behalf, granting power of attorney to someone who can make legal and financial decisions and preparing advance directives, such as “Do Not Resuscitate” orders.

An estate plan, including a last will and testament (and often trusts) that detail what you want to happen to assets and who will be guardian to minor children upon your death, spares your family the fights, legal costs and hours in court that can result when there is no estate plan.

The coronavirus has created a new problem for families. In the past, a health care surrogate would be in the hospital with you, talking to healthcare providers and making decisions on your behalf. However, now there are no visitors allowed in hospitals and patients are completely isolated. Estate planning attorneys are recommending that specific language be added to any end of life documents that authorize a surrogate to give instructions by phone, email or during an online conference.

Any prior documents that may have prohibited intubation need to be revised, since intubation is part of treatment for COVID-19 and not necessarily just an end-of-life stage.

Attorneys are finding ways to ensure that documents are properly witnessed and signed. In some states, remote signings are being permitted, while other states, Florida in particular, still require two in-person witnesses, when a will or other estate planning documents are being signed.

There are many stories of people who have put off having their wills prepared, figuring out succession plans that usually take years to plan and people coming to terms with what they want to happen to their assets.

Equally concerning are seniors in nursing homes who have not reviewed their wills in many years and are not able to make changes now. Older adults and relatives are struggling with awkward and urgent circumstances, when they are confined to nursing homes or senior communities with no visitors.

Reference: InsuranceNews.net (April 3, 2020) “Surge on wills: Fearing death by coronavirus, people ask lawyers to write their last wishes”