Life Planning 2020

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Making The Grade | Wednesday, February 26, 2020

The Berkshire Eagle |


Wednesday, February 26, 2020 | Making The Grade

In this issue Learn the best ways to build a college fund How to begin building a credit history How to get out of debt ... and stay that way

3 4 5

Gray divorce 6

By Allen Harris

How financial planners can help you every day 8 Caregivers: How to manage a loved one’s money 9 Explore long-term care insurance 10 Elder care resources 11 Why estate planning is important in Massachusetts By Paula K. Almgren, Esq. 12 On the cover: Photo by Stellrweb/Unsplash. Life Planning 2020 is a special advertising publication of The Berkshire Eagle KELLY SIKKEMA/UNSPLASH

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Time is on your side. Optimize your savings by beginning to save now. The key is to start early. Greylock Investment Group can help you take advantage of the many years you have to pursue your financial goals.

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Michael A. Fazio, CFP

LPL Financial Advisor

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Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker/dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. Greylock Federal Credit Union (GFCU) and Greylock Investment Group are not registered as a broker/dealer or investment advisor. Registered representatives of LPL offer products and services using Greylock Investment Group, and may also be employees of GFCU. These products and services are being offered through LPL or its affiliates, which are separate entities from and not affiliates of GFCU or Greylock Investment Group. Securities and insurance offered through LPL or its affiliates are:

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Making The Grade | Wednesday, February 26, 2020

Learn the best ways to build a college fund Parents and guardians should start saving early to help finance children's college educations. College is the next logical step for many newly minted high school graduates. The National Center for Education Statistics indicated that, in fall 2019, roughly 19.9 million students were slated to attend colleges 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 colleges. Families need to begin thinking about how to pay for college as early as possible. According to the Wall Street Journal, the average college graduate'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 college has been rising at double the rate of inflation for more than a decade, offers CNBC. A robust college savings account can help future students avoid considerable debt. The following are some ways to save for college.

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 colleges and universities. With education savings plans, account holders

Invest in a Coverdell Education Savings Account. 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 grow free of federal taxes.

Consider a Uniform Transfer/Gift to Minors account. 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 legal age. The money will not grow tax-free, and it can be used for purposes 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.

Open an IRA. IRAs are often associated strictly with retirement savings. However, they also can be used for qualified college 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 grow as quickly as investment accounts, routinely saving money in a savings account can be another means to saving for college.

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Open a tax-advantaged 529 college savings plan.

open investment accounts to save for qualified future higher education expenses, including room and board.


Wednesday, February 26, 2020 | Making The Grade

How to begin building a credit history

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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 borrower-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 great time to begin 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 begin 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. Borrowers 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 borrowers' 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 begin 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 great way for young people to begin showing lenders their creditworthiness.

Apply for an installment loan. Installment loans are another great 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 borrowers 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 great way for young people to prove their creditworthiness and improve their credit scores.


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Ask your landlord to help. 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.

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With an effective plan in place, people in debt often 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 incurred. Northwestern Mutual's 2018 Planning & Progress 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 ineffective methods to paying off debt. These tips can make it easier to get rid of debt.

Learn about avalanches and snowballs

Stop the flood

Cut back temporarily

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.

Cut back nonessential spending, such as cable subscriptions or gym memberships for the time being. Repurpose that extra money to pay off existing debt.

The avalanche method is a way to pay off debt. According to NerdWallet, a popular online financial resource, the debt avalanche approach encourages debtors to pay off debts with the highest interest rates first. That seems like an effective 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 off the smallest debt balance first and then moving on as debt amounts increase, is the most effective strategy. It tends to have the most powerful effect on people's sense of progress because they gain momentum by watching debts disappear.

Get a lower interest rate Customers can call customer service centers to see if they can lower debt by negotiating a better interest rate, says 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 off the balance before the promotional rate expires.

Consolidate or settle 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 negotiating with creditors and streamlining debt into one payment per month instead of many.

Making The Grade | Wednesday, February 26, 2020

How to get out of debt ... and stay that way

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Wednesday, February 26, 2020 | Making The Grade

Gray divorce

Couples who split later in life face their own set of legal and financial concerns. METRO CREATIVE

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There is a lot of fear around money in general, but no matter how much money you have, the fear about how divorce will affect 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 marriages, and this socalled “gray divorce” can throw retirement plans into disarray. 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 surprised 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 afford your new life alone, or that divorce jeopardizes the retirement you had been envisioning. It’s terrifying. 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

aggressive in your investment portfolio.

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• 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.

• 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 remarried.

• 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

• 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.

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• 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 off loans to reduce your debt burden versus saving the money for your retirement portfolio. • 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). • Do check yourself. I don’t care what you think you know. Regular finance is different 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.

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 stuff 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

Making The Grade | Wednesday, February 26, 2020

• 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

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How financial planners can help you every day

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Financial planners don’t just help people plan for retirement. Many planners are equally effective at helping clients achieve their daily financial goals as well.

Financial planning and retirement go hand in hand. Without effective 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 difficult 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 effective 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 difficult to trim some of the fat from their monthly expenditures. A financial planner will begin 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.

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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. Caregiving is a big responsibility. One crucial role caregivers 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 begins having trouble keeping a checkbook or becomes confused about money. The Family Caregiver 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 caregiving. Talking through difficult topics when parents are healthy can simplify decisions later on.

Open a joint account.

Make legal fiduciary changes. AARP suggests drawing up legal documents to manage all financial accounts. A power of attorney is a legal 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.

Put your priorities first. 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 Caregiving, an estimated 43.4 million American adults provide unpaid care to an adult or child. Taking repeated time off of work or paying for loved ones’ needs out of your own pocket can take its financial toll. Do not take on unmanageable debt.

Ask for help. 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. Arranging assets in certain ways can make individuals eligible for certain benefits.

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Joint back accounts make it easier for caregivers 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.

Life Planning 2020 | Wednesday, February 26, 2020

Caregivers: How to manage a loved one’s money


Wednesday, February 26, 2020 | Making The Grade

Explore long-term care insurance Long-term care insurance can be an effective way to pay for the often high cost of skilled nursing care. 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 college and saving for retirement, among them. Quite often the concept of making arrangements 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 program 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 offset the high costs of nursing home and other care in most instances. It helps cover the costs of services that aren't covered by regular 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-term 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 offer base benefits of $180,000 plus 3 percent inflation growth. 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.

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Seniors have many different resources at their disposal that can help answer questions or provide services when the need arises. People want to grow old gracefully 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, caregivers 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 ( 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 programs and services at the community level. This is a good place to find senior programs that can help with healthy aging - emotionally, physically and financially. AARP ( is yet another organization dedicated to helping seniors. The comprehensive AARP website offers a host of information on everything from senior discounts to products to health and other information specific to seniors. The AARP also has an affiliated 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 ( facilities in every county/city. These agencies can provide information on service programs avail-


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 ( was established to help older adults and people of all ages with disabilities live where they choose.

A network of community-based organizations helps millions of people age in place. Military veterans or those who are/were married to a veteran may be eligible for various benefits through the U.S. Department of Veterans Affairs (www. The VA offers health care services, disability compensation, burial benefits, and much more.

Making The Grade | Wednesday, February 26, 2020

Elder care resources

Why it pays to say 'yes' to 401(k) matches 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.

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.

Despite the benefits of accepting employers' offers to match, recent data from the retirement planning specialists at Financial Engines indicates that many employees are not taking advantage of these offers when given the chance. A recent survey from Financial En-

Over time, money left on the matching table could deny retirees tens of thousands of dollars, if not more. Accepting an employer's offer to match is essentially accepting free money, making it something all investors should do if given the chance.

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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 offer to "match" contributions. Employers that offer 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)


Wednesday, February 26, 2020 | Making The Grade

Why estate planning is important in Massachusetts BY PAULA K. A LMGREN, 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, regardless of the size of your estate.

Avoid state inheritance and death taxes 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 married couples, Massachusetts allows deferral of estate taxes until the death of the surviving spouse. In addition, if a married couple has revocable trusts, they can shelter $1 million (and the growth 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 married 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.

Ensure your assets are distributed the way you want 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.

Avoid probate 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

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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.

Avoid Joint Accounts 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 off the title can be difficult. If they do not agree, you could

Provide responsibly for minor children or grandchildren


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

receive unbalanced or unintended inheritances; and • Joint ownership does not provide any asset protection to your joint owner after you die.

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 legal 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

Making The Grade | Wednesday, February 26, 2020

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.

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Wednesday, February 26, 2020 | Making The Grade

children’s inheritance lets you (not the court) keep control of the inheritance, decide when each child or grandchild 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.

Protect inheritances from creditors and predators Gifted or inherited assets are protected from the courts, the beneficiary’s creditors, divorce proceedings and irresponsible spending only if they are held in a trust with proper safeguards 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 grandchildren. HELLOQUENCE/UNSPLASH

children in a will or by a separate document. If both parents die before a child reaches legal 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 grand-

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Planning in second or subsequent marriage is often different from planning in a first marriage. There may be his children, her children and sometimes their children. Each spouse probably brought assets into the marriage, 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.

Planning Tip: Lifetime trust

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Provide for a second spouse and your children


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.

Provide for a loved one with special needs 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 married 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.

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.

Plan for disability 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-

Planning Tip: You can give someone a durable power of attorney, but sometimes a power of attorney will not be accepted by whoever has control of your assets, or there is a delay while “legal” reviews the document. A revocable trust gives the trustee immediate power and the trust provides detailed instructions and directions that a durable power of attorney does not. Therefore, a revocable trust is much preferred to reliance on a durable power of attorney in the event of incapacity, but the durable power of attorney remains an essential document to have.

an adult child will take over the business, proper planning can also help you provide fairly for any children not involved with the business.

Make meaningful charitable gifts 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.

Protect your business and Pass down your values to other assets Those in high-litigation-risk future generations 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.


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 control. Planning can provide the time needed to grow and develop your business, groom a successor and look for a potential buyer if desired. If

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.

Conclusion 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 correct, while providing for your children, grandchildren, 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

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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.

Making The Grade | Wednesday, February 26, 2020

servatorship process is public and can be expensive, embarrassing, time consuming and difficult to end. It does not replace probate at death, so your family could have to go through the probate court twice.


Wednesday, February 26, 2020 | Making The Grade

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