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Colle ge is the next logical step for many newly minted high school g raduates The National Center for Education Statistics indicated that, in fall 2019, roughly 19.9 million students were slated to attend colle ges and universities in the United States Statistics Canada stated that, for the 2015-16 school year, the most recent for school statistics, just over two million students were enrolled in Canadian universities and colle ges. Families need to be gin thinking about how to pay for colle ge as early as possible. According to the Wall Street Journal, the average colle ge g raduate's student loan debt is $37,172. And the most recent data from the Federal Reserve Bank of New York indicates the overall student loan debt in America alone is roughly $1 3 trillion. The average expense of sending a child to colle ge has been rising at double the rate of inflation for more than a decade, of fers CNBC.
A robust colle ge savings account can help future students avoid considerable debt The following are some ways to save for colle ge
The U S Securities and Exchange Commission says a 529 is a savings plan designed to encourage saving for future education costs The person funding the account pays taxes on the money before it's contributed to the 529 plan. Funds can be used for education expenses. There are two types of 529 plans: prepaid tuition plans and education savings plans. The prepaid plans allow account holders to purchase units or credits at participating colle ges and universities. With education savings plans, account holders
open investment accounts to save for qualified future higher education expenses, including room and board.
A Coverdell account is a taxadvantaged method to contribute up to $2,000 per year to a child's account. Individuals need to be under a certain income level to contribute The funds will g row free of federal taxes.
This is a custodial account that holds and protects assets for beneficiaries, who are typically donors' children. The custodian controls the assets until the minor reaches le gal age. The money will not g row tax-free, and it can be used for pur poses other than school expenses. The account also may count against the student and parent when applying for financial aid, which is something to keep in mind.
IRAs are often associated strictly with retirement savings However, they also can be used for qualified colle ge payments as long as the contributions have been made for at least five years, advises Nationwide Insurance.
Use a standard savings account.
Even though it may not g row as quickly as investment accounts, routinely saving money in a savings account can be another means to saving for colle ge
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Strong credit histories can benefit adults from all walks of life. It’s never too early for young adults to begin building their financial reputations.
Credit scores play a significant role in the lives of millions of adults across the globe A strong credit history can help people secure more bor rower-friendly terms on home and auto loans, potentially saving them thousands of dollars
Credit scores are not typically on the minds of young adults who are years away from purchasing their first homes However, young adulthood is a g reat time to be gin building a strong credit history By laying a strong foundation now, young adults can reap significant rewards when they try to finance major purchases, such as cars and homes, down the road.
Open a credit account.
It's important to be gin building credit histories once you're eligible, as young people with no credit histories may find it hard to get loans or even apartments of their own Cosigners can help, but loans secured with cosigners won't do much to improve young people's credit scores Bor rowers want loan applicants who have shown they can pay their own bills, and length of credit history
is one of many variables that are used to determine bor rowers' credit scores A long history that documents a young person's track record of paying bills on time is to his or her advantage Many credit card companies issue credit to applicants as young as 18, so young people should not hesitate to be gin exploring their options. The online financial resource NerdWallet notes that young people with no credit history may need to apply for secured credit cards. Unlike more traditional cards, secured cards are backed by upfront cash deposits However, secured cardholders must still make payments on time and will still incur interest charges if they don't. These cards can be a g reat way for young people to be gin showing lenders their creditworthiness
Installment loans are another g reat way for young people to build their credit histories. According to the credit reporting agency Experian, auto loans are among the easiest types of loans to obtain Young bor rowers may need cosigners, though some lenders may not require that Young people who want to buy new vehicles can avoid leaning on their parents to facilitate their purchases and instead take out an auto loan that requires monthly payments A track record of making installment loan payments on time and in full is a g reat way for young people to prove their creditworthiness and improve their credit scores.
Young people who rent and pay their rent on time might finally be able to benefit from that In the past, the only way rent payments were included on credit reports was if tenants were delinquent with their rent payments and subject to lawsuits or were reported to collection agencies. However, Experian recently started to include positive rental payment information in their credit reports Young people with histories of making rent payments on time can ask their landlords to report their positive payment histories to the credit bureaus
With an e ective plan in place, people in debt of ten can dig themselves out of financial peril.
Debt can quickly sneak up on a person However, it can take much longer - sometimes decades - to get out of debt. And that's a big concern when considering just how much debt the average person has incur red
Northwestern Mutual's 2018 Planning & Prog ress Study says the average American has about $38,000 in personal debt, excluding home mortgages A survey from the insolvency firm MNP Ltd. found that 31 percent of Canadians do not make enough to cover their bills and 46 percent are a mere $200 or less away from failing to pay debts at month's end.
Researchers in the United Kingdom analyzed data from 1 4 million credit card holders and found that people typically choose inef fective methods to paying of f debt. These tips can make it easier to get rid of debt.
Avoid new debt at all costs. Stop using credit cards, cease taking loans, do not buy any bigticket items, and scale back on general purchases
The avalanche method is a way to pay of f debt. According to NerdWallet, a popular online financial resource, the debt avalanche approach encourages debtors to pay of f debts with the highest interest rates first. That seems like an ef fective way to get out of debt quickly However, in a 2016 investigation for the Harvard Business Review, researchers found that the snowball method, which prioritizes paying of f the smallest debt balance first and then moving on as debt amounts increase, is the most ef fective strate g y It tends to have the most powerful ef fect on people's sense of prog ress because they gain momentum by watching debts disappear.
Cut back nonessential spending, such as cable subscriptions or g ym memberships for the time being. Repur pose that extra money to pay of f existing debt
Customers can call customer service centers to see if they can lower debt by ne gotiating a better interest rate, says Credit com Since much of a credit card payment goes toward monthly interest charges and not toward the actual balance, this can be a way to get a handle on debt. Some people prefer to use a balance transfer to get a lower rate on another card and try to pay of f the balance before the promotional rate expires.
When debt is so substantial that debtors cannot see the light at the end of the tunnel, they might ask a creditor to accept a one-time, lump sum payment to satisfy the debt Debt consolidation companies also can help by ne gotiating with creditors and streamlining debt into one payment per month instead of many.
Live the life you envision and make
BY A LLEN H A R R IS
There is a lot of fear around money in general, but no matter how much money you have, the fear about how divorce will af fect money is huge Each year in the U S , more than 800,000 people get divorced. Most recently, older couples are calling it quits on their long-term mar riages, and this socalled “g ray divorce” can throw retirement plans into disar ray However, careful planning can protect you from the financial fallout.
Divorce creates a financial risk for both spouses, but in particular for a spouse that might have sidelined a career to stay home and raise a family and have little or no savings in their own name, and long ago may have ceded control of the family finances to their breadwinning partner. According to a
study from Fidelity Investments, more than one in three people who went through a divorce said they were still struggling financially five years later. Even among people who were actively involved in managing household finances, more than one in four were sur prised by how much it costs to live alone.
Splitting household income in half, then increasing the expenses will change your life You may find that you can’t af ford your new life alone, or that divorce jeopardizes the retirement you had been envisioning It’s ter rifying
There are things you can do to manage the cost of a divorce; and there are mistakes you don’t want to make when navigating this unfamiliar
• Don’t try to play “catch up” after the divorce by getting too
agg ressive in your investment portfolio
• Do get familiar with the “QDRO,” the Qualified Domestic Relations Order, that courts use to split qualified retirement plans, like pensions or 401(k)’s It takes a long time to get approved, so start early and learn which assets may be permitted to be split.
• Do go back into the workforce if you have not been working. Not just for the paycheck but because you may need health care insurance A common mistake people make is waiting until the divorce has been finalized before looking for work But by that time, they’ve squandered months, or even years, when they could have been getting ahead in the workplace and
earning healthcare qualifications.
• Don’t rush to take social security, because you could maximize benefits by delaying it Conversely, don’t just default to waiting as long as you can if you think that will maximize benefits. If someone says wait as long as you can so that benefits are maximized, whether you are divorced or not, without considering other scenarios, they’re stupid. Also, if you are divorced, but your marriage was longer than 10 years, you can receive benefits based on your ex-spouse, even if they have remar ried.
• Do open an IRA in your own name so that the other spouse can transfer their IRA directly into it so that you don’t pay tax on it.
• Do argue for a piece of your exspouse’s pension, as they are typically viewed as joint assets and you could be entitled to some of it
• Don’t sell your house right away The most common way for the spouse who gets the home in the divorce to become liquid and to reduce costs is to sell the family home You can consider a reverse mortgage to create an income stream while remaining in your house.
• Don’t move out of your house until you’ve consulted your attorney, as your spouse can argue that you’ve abandoned your family
• Do the math of the pros and cons of paying of f loans to reduce your debt burden versus saving the money for your retirement portfolio
• Do check yourself I don’t care what you think you know Re gular finance is dif ferent from divorce finance.
• Do consult a financial planner
• Don’t be an idiot and try to hide assets. Don’t make big withdrawals or big purchases, because to the judge that’s going to scream that you’re trying to hide assets. You may think you’re being clever, but you’re just going to get yourself in trouble.
• Do get organized This can be one of the most overwhelming activities, but it’s one of the most important. The goal is to track everything you own, and everything you owe
• Do think about tax implications. Don’t get blinded by the “win” of getting one asset versus another when, after tax, you could be a loser For example, if you can get your hands on a Roth IRA, you’ll enjoy the benefits of taxes having already been paid Also consider who will be able to claim children as dependents Or if you need liquidity, you may be able to exclude an early withdrawal penalty by drawing from one qualified account, such as a 401(k) but not another, such as an IRA (depending on the timing of the withdrawal).
If you’re feeling overwhelmed, start with a checklist A checklist, which your financial planner can provide to you, will help you assemble documentation at your own pace, which can be helpful in times of emotional turmoil The checklist will contain some of the obvious, such as the stuf f that needs to be changed - wills, insurance policies, powers of attorney, advanced healthcare directives, IRA beneficiaries, credit card accounts, and bank accounts. Also on the checklist that might not be as obvious are opening your own P O box if you still live with your spouse to keep them from “accidentally” opening important letters, or safe deposit boxes to be sure that items with emotional value are protected Your financial planner will want to see more documents to more accurately assess how your income and expense will support your lifestyle as you prepare for your future as a newly single person. There is likely little doubt that you know you’re doing the right thing. You just want to be sure you’re doing that right thing the right way
Disclosures: Allen Harris, the author of Build It, Sell It, Profit – Taking Care of Business Today to Get Top Dollar When You Retire, is a Certified Business Valuation Specialist, Certified Value Growth Advisor, and Certified Exit Planning Advisor for business owners He is the owner Berkshire Money Management (BMM) in Dalton, MA, managing investments of more than $500 million Allen’s forecasts and opinions are purely his own None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquiries to Allen at AHarris@BerkshireMM.com.
Financial planners don’t just help people plan for retirement. Many planners are equally e ective at helping clients achieve their daily financial goals as well.
Financial planning and retirement go hand in hand. Without ef fective planning, many people would never be able to retire, while others might have to work much longer than they hope to While financial planning is essential to achieve long-term goals, planning also can make it easier for people to meet their everyday financial needs
Managing money is a big responsibility, and it's one that many people may need help with. A recent survey from Pew Charitable Trusts found that 55 percent of Americans spend as much or more than they earn That's not only compromising their financial futures, but also making daily life more stressful, as the American Psychological Association's annual "Stress in America" survey routinely finds that money is a top cause of stress among millions of Americans.
Adults who are finding it dif ficult to manage their money on a day-to-day basis may benefit from the services of a financial planner. Financial planners can help
people create ef fective long-term financial plans, and they also can be vital resources for people who need help managing their money every day
Planners can look at things from an unbiased perspective. An honest assessment of monthly expenses is essential when creating a monthly budget However, many people tend to be biased when it comes to their monthly expenses For example, some may feel that three streaming service subscriptions are something they cannot live without. That can make it dif ficult to trim some of the fat from their monthly expenditures A financial planner will be gin by examining your monthly expenses and may or may not make unbiased suggestions regarding where you can save.
· Planners have the time. The average household is a hectic
place. Adults with commitments at work and home often cite a lack of time as one of the reasons they aren't more on top of their finances A 2018 survey from Bankrate com found that 16 percent of respondents aren't saving more money because they haven't gotten to it. Financial planners have the time to help clients save, and over time a planner can be an expense that pays for itself if families are saving more as a result of enlisting the services of a planner.
· Planners have the expertise many people lack. One of the reasons people struggle financially is that it can be hard to navigate the world of investments, insurance and taxes Planners have the financial literacy necessary to navigate those waters successfully and can help people realize both their short- and long-term financial goals
Managing money is just one of the many tasks associated with being a caregiver.
The number of retirees is on the rise. Data from the U.S. Census Bureau points out that, by 2030, there will be 81.2 million Americans over age 65, and many of them will need help taking care of themselves.
Care giving is a big responsibility. One crucial role care givers may take on involves managing a loved one’s finances AARP states that acting as a money manager becomes especially important if a loved one be gins having trouble keeping a checkbook or becomes confused about money
The Family Care giver Alliance® indicates millions of Americans are managing money or property for a family member or friend who is unable to pay bills or make financial decisions.
Juggling one’s own finances and the responsibilities of another person’s money can take its toll. Here are several ways to navigate these often tricky waters
Discuss plans in advance.
Have conversations even before an aging loved one needs care giving. Talking through dif ficult topics when parents are healthy can simplify decisions later on.
a
Joint back accounts make it easier for care givers to manage loved ones’ money if the person becomes physically or mentally incapacitated When necessary, you can step in as a money manager to pay bills, make deposits and withdrawals and monitor account balances.
Make legal fiduciar y changes.
AARP suggests drawing up le gal documents to manage all financial accounts A power of attorney is a le gal document in which one person assigns another the power to make financial decisions on their behalf. This also protects family interests, so that another relative like
a sibling, who may want his or her share of a loved one’s money, will not have access Documenting fiduciary changes in the letter of the law can serve as a measure of protection against potential problems
You may end up running yourself emotionally and financially ragged catering to a loved one’s needs According to a 2015 study from the National Alliance for Care giving, an estimated 43.4 million American adults provide unpaid care to an adult or child Taking repeated time of f of work or paying for loved ones’ needs out of your own pocket can take its financial toll Do not take on unmanageable debt
Speak with a financial advisor and/or elder care attorney about the best ways to manage a loved one’s money to ensure an aging parent or child will be provided for Ar ranging assets in certain ways can make individuals eligible for certain benefits.
Long-term care insurance can help protect retirement dollars by paying for skilled nursing homes or home health aides.
Individuals plan for many different scenarios: buying a home, putting kids through colle ge and saving for retirement, among them. Quite often the concept of making ar rangements for one's golden years is placed on the back burner However, that can be an expensive mistake
According to AARP, by the time a person reaches age 65, he or she
has a 50-50 chance of needing longterm care at some point in the future Medicare, the federal health insurance prog ram for people who are 65 or older in the United States, does not cover custodial care, which is the primary form of care in nursing homes Therefore, many people must find alternative ways to finance nursing home and other long-term care options. Those who must pay out-of-pocket spend an average of $85,000 per year on a nursing home in the U.S., and this is often an expense that has not been included in retirement budgets.
Long-term care insurance can be the best option to of fset the high costs of nursing home and other care in most instances. It helps cover the costs of services that aren't covered by re gular health insurance, namely assistance with routine daily activities like bathing, dressing or getting in and
out of bed, advises the financial resource NerdWallet Such care may be administered at home by a private health aide or in a skilled nursing facility. Most policies also will reimburse for services rendered in an assisted living facility or an adult day care center.
According to a study revised in 2016 by the Urban Institute and the U.S. Department of Health & Human Services, about 14 percent of people age 65 and older will require care for more than five years. Getting the facts about long-term care insurance can help individuals make important decisions for their futures
The earlier a person buys a long-ter m care insurance policy the lower the rates tend to be. The American Association of Long-Term Care Insurance says
a 65-year-old couple can typically buy a policy for $4,800 per year to of fer base benefits of $180,000 plus 3 percent inflation g rowth. That plan price more than doubles if purchased at age 75.
· Cost also is based on the maximum amount the policy will pay per day and the number of years the policy will pay. Many policies limit how long or how much they will pay, some between two and five years, states the Administration on Aging.
· Policies require some medical underwriting, so not everyone will qualify.
AARP suggests seeking out an independent agent who sells policies from multiple companies rather than a single insurer.
Seniors have many di erent resources at their disposal that can help answer questions or provide ser vices when the need arises.
People want to g row old g racefully and maintain their independence as long as possible There are many decisions to make as well as information to wade through to ensure needs are met and proper care is received through one's golden years Individuals, care givers and families may find that a few helping hands along the way can be invaluable.
Numerous elder care resources are available for those who don't know where to look Start by researching the National Council on Aging (www.ncoa.org). This is a national leader and trusted as-
sociation that helps people age 60 and older. The council works with nonprofit organizations, governments and businesses to organize prog rams and services at the community level. This is a good place to find senior prog rams that can help with healthy aging - emotionally, physically and financially
AARP (www aar p org) is yet another organization dedicated to helping seniors. The comprehensive AARP website of fers a host of information on everything from senior discounts to products to health and other information specific to seniors. The AARP also has an af filiated charity that works to help low-income seniors procure life's necessities.
At the local level, the federal government has mandated Area Agency on Aging (www.n4a.org) facilities in every county/city These agencies can provide information on service prog rams avail-
Employer-sponsored 401(k) plans are great ways to save for retirement, potentially paving the way to worry-free golden years Such plans are even more attractive when employers o er to "match" contributions Employers that o er to match employee contributions typically will do so up to a given percentage For example, some companies may match up to 2 percent That means that employees who contribute at least 2 percent of their paychecks to an employer-sponsored 401(k)
able to the seniors in the area, as well as financial resources. These facilities give seniors access to volunteers who can take seniors around by car, and some provide meals-on-wheels services.
The Administration for Community Living (www.acl.org) was established to help older adults and people of all ages with disabilities live where they choose
plan will receive an additional 2 percent from their employers For those who contribute 2 percent, that match will double their contributions to 4 percent at no cost to the employee
Despite the benefits of accepting employers' o ers to match, recent data from the retirement planning specialists at Financial Engines indicates that many employees are not taking advantage of these o ers when given the chance A recent survey from Financial En-
A network of community-based organizations helps millions of people age in place.
Military veterans or those who are/were mar ried to a veteran may be eligible for various benefits through the U.S. De par tment of Veterans Af fairs (www. va gov) The VA of fers health care services, disability compensation, burial benefits, and much more
gines found that $24 billion in 401(k) matches goes unclaimed ever year, with the typical employee missing out on more than $1,300 in matches annually
Over time, money left on the matching table could deny retirees tens of thousands of dollars, if not more Accepting an employer's o er to match is essentially accepting free money, making it something all investors should do if given the chance
BY PAU LA K A LMGR EN, ESQ
The real reason we need to do estate planning is to take care of ourselves and our families the way we want. But there are many considerations, such as taxes; privacy; protection of minors and disabled family members; taking care of a deceased child’s children; creditor protection; avoidance of probate and eliminating the need for court involvement to appointment a guardian or conservator over your body and money if you become disabled; to eliminate or minimize state estate taxes; and to keep your assets and the names and addresses of your beneficiaries private
Proper estate planning is important, re gardless of the size of your estate
The Federal gift and estate tax exemption is $11 58 million per person ($23.16 million for married couples), and Massachusetts’ estate tax exemption is $1 million per person. Once this amount is exceeded, even by $1, the individual is taxed by the Commonwealth on the entire amount This means your estate could be exempt from federal tax but have to pay significant state estate tax.
With mar ried couples, Massachusetts allows defer ral of estate taxes until the death of the surviving spouse. In addition, if a mar ried couple has revocable trusts, they can shelter $1 million (and the g rowth in the $1 million), owned by the Trust of the
first to die, from tax that is due at the death of the surviving spouse. For example, if a mar ried couple has a combined estate of $1 6 million and the survivor died without Trust planning, they will pay approximately $71,000 in estate taxes. With trust planning and each trust owning one-half of the assets, zero tax is due Proper estate planning can reduce or even eliminate state inheritance and death taxes.
If you don’t have a revocable trust and you die with assets solely in your own name, your assets will have to go through the court process called probate in order to retitle them to those named in your will or, if you don’t have a will, to pass under the default state law The time, cost and loss of privacy and control that come with probate should be avoided. That is why revocable trusts are
Everyone has an estate plan. It is either the one you have created or the default plan of the Commonwealth. In our experience, it is very unlikely that the Massachusetts default plan is what you would want Most often your assets go outright to your closest family members (who Massachusetts considers to be “closest” is complicated in non-nuclear families). Non-family members, like an unmarried partner, will not receive any of your assets.
ever more popular
Assets held by a trust with a valid beneficiary designation pass outside probate to whomever you have named as beneficiary(ies), and property owned jointly with right of survivorship will automatically transfer to the survivor
Many older people add an adult child to the title of their assets (especially their home) as joint owner, often to avoid probate But this can create all kinds of problems:
• When you add a joint owner, you lose control;
• Your jointly-owned assets are exposed to your joint owner’s possible misuse of them;
• You could lose part of these assets to your joint owner’s creditors;
• The assets could become part of a joint owner’s divorce proceedings;
• There could be income tax issues;
• It is easy to add a joint owner, but taking someone’s name of f the title can be dif ficult If they do not ag ree, you could end up in court;
• If you have more than one child but only name one to be joint owner with you, fluctuating values and sibling discord could cause your children to
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receive unbalanced or unintended inheritances; and
• Joint ownership does not provide any asset protection to your joint owner after you die
Planning Tip: Probate can often be avoided by using joint ownership and beneficiary designations but, it can lead to unintended consequences and has unintended risks A far better way to avoid probate is to establish and fully fund a revocable trust. With a revocable trust, you keep control over your assets, avoid uncertainty and unintended consequences and avoid the risks associated with joint ownership. That’s why a revocable trust plan often is preferred by many clients and professionals alike
If any of your heirs are minors and you have not made an estate plan, a court will control the minors’ inheritances until they reach le gal age (age 18), at which point the child will receive, in cash, whatever is left to spend as they see fit For most eighteen-yearolds, that is a recipe for disaster! In Massachusetts, a parent may nominate a guardian for minor
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children’s inheritance lets you (not the court) keep control of the inheritance, decide when each child or g randchild will receive it, determine what controls will be put in place to protect the beneficiaries’ inheritance from themselves and others, and select someone you know and trust to manage it.
Gifted or inherited assets are protected from the courts, the beneficiary’s creditors, divorce proceedings and ir responsible spending only if they are held in a trust with proper safe guards built into it. In a trust, you can instruct your trustee to make distributions as needed to trust beneficiaries, which can include your spouse, children and g randchildren.
You may have a spouse, child, sibling, parent or other loved one who is physically, mentally or developmentally disabled – from birth, illness, injury or even substance abuse – who may be entitled to government benefits now or in the future Most of these benefits are available only to those with very minimal assets and income. A non-structured inheritance often disqualifies a disabled person from receiving government benefits that are needed for their care. Similarly, there is an exception for mar ried couples to protect the marital assets of the first spouse to die in a trust under the will (called a testamentary trust) for the surviving spouse’s lifetime benefit, and Medicaid will not count the assets held in the testamentary trust.
children in a will or by a separate document. If both parents die before a child reaches le gal age, the court will have to decide whether to accept the nomination or appoint someone to raise that child. If the last parent to die has made no nomination, the court will act without knowing whom the parent would have chosen
On the other hand, establishing a trust for your children’s or g rand-
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Planning in second or subsequent marriage is often dif ferent from planning in a first marriage There may be his children, her children and sometimes their children. Each spouse probably brought assets into the mar riage, and each may want those assets to go to their own children after they die At the same time, each spouse probably would want to make sure their surviving spouse will have enough to live on
Naming a spouse who is not the parent of all of your children as a joint owner or beneficiary of life insurance or retirement accounts can be a problem because that means your spouse will have control of the proceeds if you die first Promises made now to include your children that are not your spouse’s children may not work out if you are the “glue” holding your children and their stepparent together.
trust planning is often the best solution. Through a trust, you can provide your spouse with lifetime income (or income until remarriage) yet keep control over to whom, when and how whatever assets are not needed for that purpose are distributed.
Planning Tip: A special needs trust can provide for a loved one without jeopardizing valuable government benefits It is carefully designed to supplement and not jeopardize the benefits provided by local, state, federal or private agencies At the death of the beneficiary of the special needs trust, you decide who gets the remaining funds.
If you can’t conduct business due to mental or physical incapacity (dementia, stroke, heart attack, etc.), having a will won’t help. This is because a will can only deal with what happens after you die You need a durable power of attorney that contains any and all powers your agent may need to exercise on your behalf if you are incapacitated. Make sure you have an alternate agent(s) named In Massachusetts, the power delegated has to be stated in the document itself for your agent to take each specific action. If you do not have a durable power of attorney a probate court will have to appoint a conservator to manage assets for you. Then a court, not your family, will control how your assets are used to care for you That will continue until you die or recover The con-
servatorship process is public and can be expensive, embar rassing, time consuming and dif ficult to end. It does not replace probate at death, so your family could have to go through the probate court twice.
Planning Tip: You can give someone a durable power of attorne y, but sometimes a power of attorne y will not be accepted by whoever has cont rol of your assets, or there is a delay while “le gal” reviews the document. A revocable t rust gives the t rustee immediate power and the t rust provides detailed inst ructions and directions that a durable power of attorne y does not. Therefore, a revocable t rust is much preferred to reliance on a durable power of attorne y in the event of incapacity, but the durable power of attorne y remains an essential document to have
Health care documents are critical. You need a health care proxy. In this document you give someone (called the agent) the power to make health care decisions for you if you are unable to make them for yourself. You also need to name an alternate agent and successor agent It is important to have the contact telephone numbers for your named agents and to give your agents and all health care providers copies of the health care proxy. In Massachusetts, the law does not recognize a living will; however, the MOLST form is an advanced directive signed by your health care provider. You complete this with your health care provider, and it addresses your health care wishes It is important to discuss your health care wishes with your agents as
they speak for you if you are unable to communicate A HIPAA release and authorization letter addresses to whom your doctors can disclose your medical information without liability. Finally, the exorbitant costs of long-term care, most of which are not covered by health insurance or Medicare, can wipe out a lifetime of savings Consider longterm care insurance to protect your assets The hybrid life insurance/long-term care insurance policy protects your investment with a death benefit equal to the premiums
Those in high-litigation-risk fields like construction, medicine, law and real estate must be concerned about protecting their assets from lawsuits All business owners need to plan for what will happen to their business when they can no longer manage it due to incapacity, retirement or death.
Planning Tip: Asset protection planning can and perhaps should be included in your estate planning. The time to plan for asset protection is before there is any potential threat Once the threat of a claim arises, it may be too late.
Planning Tip: If you are a business owner, business succession planning also should be a part of your estate planning. Someday, your business will pass out of your cont rol Planning can provide the time needed to grow and develop your business, groom a successor and look for a potential buyer if desired If
an adult child will take over the business, proper planning can also help you provide fairly for any children not involved with the business.
If you want some or all of your assets to go to a favorite charitable, religious or educational organization, you must include this in your estate planning. Without a valid will or trust, your assets will be distributed by state law and no charity will be among your beneficiaries.
For many people, passing along their accumulated intellectual, spiritual and human wealth to the next generation is just as important as passing along their accumulated financial wealth and business Most people take the time to pass along their values and human wealth Many fail to pass along their financial wealth and plan for their businesses. Don’t be part of the more than 90% of family businesses that fail to survive to the third generation Take the time to plan how you leave assets to your family, and that will let them know how much you care about them It is another way to convey your values
If you have young children, you can select someone who shares your views to manage their inheritance, and you can provide a letter of instruction to your chosen guardian with your views on the care of your children. Grandparents can provide for private or re-
ligious education. Even end-of-life and funeral/burial instructions can be personal and convey your values. Final gifts to your church or synagogue, university, hospital or other favorite cause will let your family know that giving is important to you.
There are even more reasons than these to do estate planning, even when avoiding estate tax is not a concern You should name your desired fiduciaries; avoid probate; save costs and time and keep your heirs and your assets private; minimize or avoid estate tax; and confirm that your beneficiaries for IRAs or life insurance are cor rect, while providing for your children, g randchildren, beneficiaries and pets!
Paula Almgren practices estate and eldercare law in Lenox and is the President of the National Academy of Elder Law Attorneys for Massachusetts, the largest chapter in the nation You can reach her at 413-637-5075 or visit www almgrenlaw com
AuthorAllenHarris-founderandowner of BerkshireMoneyManagement-guidesyou towardamorepro table,smoothtransfer of yourbusinesswithactionable,soundadvice. Getacomplimentarycopy or beginacon dentialconversationaboutretiring by emailing himatAHarris@BerkshireMM.com.
