Articles Posted in Financial Planning

The Social Security Program is 86 years old and has become a fundamental aspect of how many aging people pay for expenses. Despite its vast importance, social security is full of challenges and weaknesses. 

Estate planning professionals once referred to a “three-legged stool” for retirement planning in this country.  The three legs included a pension, personal savings, and Social Security payments. Pensions that secure income is not nearly as common as they once were. Furthermore, a very small portion of people in the United States has support from each of these three legs.

Since 1940, however, Social Security has remained a steadfast source of payment. Many people, however, are uncertain about the program’s future. While the program’s demise is not granted, Social Security’s funds are certainly on a downward trend and they must be fixed if they’re to last. If Congress fails to take action, very soon Social Security might lack the funds to pay its promised benefits. 

When a person passes away, survivors almost always remember the need to take several important actions. Often, some of these actions are time-sensitive and must be performed within a narrow time window. Given the substantial emotional repercussion of losing a loved one, the process is often overwhelming and can even be difficult to navigate. To better prepare you for what happens after an elderly loved one passes away, this article reviews some important steps that you will likely need to take or at the very least consider taking. 

Actions Immediately After a Loved One’s Death

Many people find themselves in shock immediately following a loved one’s death. During this period, it’s critical, however, to take some important steps, which include the following:

Approximately, 26.9 million Americans are enrolled in Medicare Advantage Plans as of January 2022. While many people are content with their plans, not everyone is. Individuals have between January 1, 2022, to the end of March 2022 to make revisions to their Advantage Plan. During this period, a person can also drop a Medicare Advantage Plan and opt for a basic Medicare plan, which includes Part A and B. 

Individuals should be aware of some important details before switching Medicare plans, though. For one, people can change plans early in the year. For example, a person might discover that their Medicare plan no longer covers important medication.

The Narrow Window to Change Plans

As the new year begins, new opportunities are created for people to make the most out of their finances. Currently, the country is proceeding through the “Great Reshuffle”, which is seeing a large number of workers leave their jobs and make new ones. While many workers want to do their best to save as much as they can, some people are finding it hard to save and reach financial goals. This article reviews some of the important things that you can do to make the most of your finances in 2022 and beyond. 

# 1 – Examine Existing Retirement Plan Contributions

This year, 2022 workers can contribute as much as $20,500 to a 401(k) or make similar contributions to 403(b) plans and many 457 plans. This is $1,000 greater than the limit established in 2021. If you’re at least 50 years old, you can also add another $6,500 in “catch-up” contributions. 

TD Wealth recently released a survey of estate planning experts who report that health care costs are now the biggest threat to estate planning. While only 7% of estate planning experts reported this information in 2019, 22% of estate planning professionals cited health care costs as at the forefront of estate planning concerns. Additionally, concerns about market volatility rose substantially from last year. Family conflict fell from 25% in 2020 to 10% this year. Over the course of previous years, TD Wealth reported that the most common cause of family conflict was the failure to communicate estate plans with family members. The number of family conflicts fell substantially in 2021. The study also reported that 89% of estate planners reported female clients losing jobs, leaving the workforce, or facing salary cuts due to the pandemic. As a result, a large number of female clients made changes to their financial situation. Women have been negatively impacted more than men due to the COVID-19 pandemic. 

Prepare for How Much You Will Need in Health Care Costs

An average retired couple age 65 in 2021 needs approximately $300,000 saved after taxes to cover health care expenses that they face during retirement. This amount, however, can vary substantially based on when you retire as well as your health later on in life. The sooner that you can prepare a plan for how you will pay these costs, the better. The amount that you need also depends on what type of financial accounts you use to pay for your healthcare.

Adequate estate planning is a critical part of the divorce process, but it is frequently overlooked because people are worried about navigating many other aspects of the divorce process. 

Careful attention should be paid to the complex issues that arise when handling estate plans where a divorce action is either pending or has been finalized. You should continuously review and update your estate plan after separation and before filing a divorce complaint as well after filing a final decree of divorce.

To make sure that you engage in sufficient estate planning after a divorce, this article reviews some key strategies that you should make sure to review so you have the best chance possible of protecting your wishes after divorce and separation.

The Setting Every Community Up for Retirement Enhancement Act of 2019, Pub. L. 116–94, was signed into law by President Donald Trump on December 20, 2019, as part of the Further Consolidated Appropriations Act, 2020 (The Secure Act). Future beneficiaries of retirement accounts have different rules than current inheritors. What follows is a brief description of some of the ways the new rules under The Secure Act may impact your future beneficiaries.

 The Secure Act changes the way people will inherit money — are you affected by the new rules?

 The new rules do not treat all beneficiaries the same. Beneficiaries of qualified retirement accounts, such as individual retirement accounts and 401(k) plans, now must withdraw all of the money out of those accounts within 10 years, instead of over their lifetime as was previously allowed (commonly referred to as the “stretch IRA” provision). An IRA is an individual retirement account. There are no required minimum distributions within that time frame, but the account balance must be zero after the 10th year.

Medicaid is an important needs-based program to help pay for the vital healthcare of millions of at risk people in this country. In fact, many older Americans plan on using some part of Medicaid to pay for nursing home or in-home nursing care later on in life only to find out they do not qualify for the program because they own too many assets.

Fortunately, with a little forward thinking and estate planning, these individuals can spend down their assets to qualify for Medicaid and avoid possible look back penalties, if applicable. In fact, you may already be working on some of these types of thing already and never knew they would help you qualify for Medicaid.

Paying off debt

When someone passes away without creating a last will and testament or trust, the individual passes away in intestate, meaning his or her assets will be distributed to heirs based on a line of succession under New York state probate laws. While most of us plan for the time after we pass away, not everyone goes through the process of creating a will or trust and this can create some complex legal issues when the estate passes through probate.

Unless a trust is created, every estate must pass through probate court in New York, even if the deceased created a clear and concise will. However, there are a few types of assets that will not need to pass through intestate sucession if the decedent pases away without a will. These include:

  • Life insurance payouts

All grandparents want the best for their children and grandchildren and many take the initiative to set aside part of an estate to help future generations get a head start in life. Forward thinking grandparents should also be aware there are certain tax and entitlement benefits rules seniors need to follow to remain in compliance with the law in order to avoid jeopardizing many of their own assets.

First, grandparents need to know the Internal Revenue System (IRS) places a $14,000 limit on untaxable gifts each year to individual grandchildren. Married couples may each give up to $14,000 to each and every grandchildren without any taxes, making the total $28,000 per year. Grandchildren receiving these gifts will not have to pay any income tax of these gifts, unless the assets generate income.

Additionally, grandparents can make direct payments to doctors and educational institutions to cover services on behalf of their grandchildren. The IRS does not consider payments for medical treatment and education as gifts subject to tax and grandparents can still give up to $14,000 each per year to their grandchildren without worrying about gift taxes.

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