What’s the Difference Between Whole Life and Universal Life Insurance?

Life insurance
Life insurance is a great way to protect your family. Whole life and universal life offer some benefits term life doesn’t.

Whole life insurance helps with long-term goals, since it provides individuals with consistent premiums and guaranteed cash value accumulation. Universal life insurance gives consumers flexibility in premium payments, death benefits, and the savings component of their policy.

Investopedia’s article, Whole Life vs. Universal Life Insurance, explains that these two types of life insurance fall in the category of permanent life insurance. In contrast to term insurance, which guarantees a death benefit payout during a specified period, permanent policies provide lifetime coverage. If you want to cancel your permanent life policy, you’ll get the policy’s cash value. These policies are typically made up of two parts: a savings or investment part and an insurance part. Their premiums are higher than term policies, and insureds can also take out a loan by borrowing against the cash value. Thus, permanent life insurance is also called cash-value insurance.

Whole life insurance covers you as long as you’re alive. You must pay the same premium for a specific period to get the death benefit. This policy usually stays intact for the rest of your life, no matter how long you may live. This policy is good for long-term responsibilities, such as a surviving spouse’s income needs and post-death expenses.

One of its features is that it combines life insurance coverage with savings. Therefore, you may have to pay higher premiums at the start, when compared to a term insurance policy.

The insurance company deposits some of your money into a high-interest bank account. With every premium payment, your cash value increases. This savings part of your policy grows your cash value on a tax-deferred basis. You can receive the dividends in cash or allow them to accumulate with interest. You can also use your dividends to reduce your policy’s premiums or buy more coverage.

Universal life insurance is also called “adjustable life insurance,” because it has more flexibility compared to whole life insurance. You can decrease or increase your death benefit and pay your premiums at any time in any amount (with certain limits) after your first premium payment has been made. With this type of policy, you may be able to increase the face value of your insurance coverage. You can also decrease your coverage to a minimum amount, without surrendering your policy. Surrender charges may be applied against the cash value of your policy.

As far as the death benefit, there are two options: a fixed amount of death benefit or an increasing death benefit that is equal to the face value of your policy plus your cash value amount.

You also can change the amount and frequency of your premium payments. Therefore, you can increase your premiums or pay a lump sum, according to the specified limit in the policy. Some of your premium minus the cost of insurance is again deposited into an investment account, and any interest accrued is credited to your account. The interest grows on a tax-deferred basis, which increases your cash value. You can decrease or stop your premiums to use your cash value to pay premiums in a financial hardship. You can also partially withdraw funds with universal life insurance.

The downside of universal life insurance is the fluctuation of the return; if the policy does well, there could be growth in a savings fund. However, a bad performance means the estimated returns are not earned. Surrender charges may also be imposed when you terminate your policy or withdraw money from the account.

All in all, universal life insurance can be great protection for your family because of its security, flexibility, and variety of investment options.

Reference: Investopedia (April 18, 2019) Whole Life vs. Universal Life Insurance

Other articles you may find interesting: 

How Will The 2020 SECURE Act Affect You?

Roth IRA Tips and Tricks

Timeshares: The Inheritance No One Wants

timeshares vacations
Your heirs may not want the burden of  owning your vacation timeshare.

It seems like you can’t throw a rock in Florida without hitting someone who owns a timeshare, or who considered buying a timeshare. In general, the lucky ones are those who walked away from the sales pitch.

Don’t get me wrong – I’m sure there are millions of Floridians who actually use their week or two for getaways or family vacations. At least for a while. But, as an estate planning, elder law, and probate attorney, I frequently see families dealing with the downside of timeshare ownership. And as a financial professional, I can tell you they are NOT an investment – they’re an ongoing expense for an illiquid asset that will not appreciate, much like a swimming pool. People buy such things because they want them, not because they make any financial sense.

A timeshare is a form of fractional ownership in a property, typically in a resort or vacation destination. For example, if you purchase one week at a timeshare condominium each year, you own a 1/52 portion of that unit. Timeshares may be evidenced by a deed (you purchased an ownership interest in the property) or just a contract (you leased the right to use the property).

So, what are some of the downsides? Well, first of all, the fees never end. On top of the loan payment (if you financed your timeshare), there are annual fees, unexpected assessments, and miscellaneous fees to change weeks, trade locations, etc. And unlike a house, land, or even a car, you’ll never know what your timeshare is worth. While there are exceptions for the most desirable locations/weeks in places like Disney or highly desirable beach resorts, most “used” timeshares are NOT repurchased by the timeshare company, and end up being sold for next to nothing. In fact, sometimes it’s hard to even give them away!

Here’s a true story: Jack had a timeshare he no longer wanted. He gave it to a family member, Bill, as a gift. Bill used it for several years, but then had a financial setback and couldn’t afford the fees. He fell behind. He tried to sell it, but to no avail. So then he offered to give it back to Jack. Jack wanted no part of the timeshare and associated fees, and said “Thanks, but no thanks.” Then one day Jack received a recorded deed in the mail; Bill had quitclaimed the timeshare back to Jack! (In Florida, only the seller has to sign the deed). So, Jack then quitclaimed the timeshare back to Bill. I don’t know what happened after that – maybe they’re still tossing the hot potato back and forth.

Timeshares also cause problems at the owner’s death when:

  • The owner never transferred it into his living trust, thus triggering probate for an illiquid asset.
  • The owner became ill before death and stopped paying the annual fees or assessments, and at death she owes thousands of dollars to the timeshare company, for a property no one will buy.
  • The timeshare was properly transferred to a living trust, but no heirs want it and they can’t find a buyer.
  • The post-death transfer of the timeshare was done incorrectly, and eventually the timeshare company tells the heir that they can’t use the week until they re-probate the property and have the transfer done properly. Oh, but they still need to pay the fees and assessments!

Sometimes, abandonment is the only option children have when Mom and Dad leave them an unwanted timeshare, but it has to be done properly to prevent problems.

So, if you own a timeshare, find out whether anyone actually wants it when you die, AND whether they can afford to pay the fees and assessments year after year, even if they lose their job. If not, consider getting rid of it while you’re still alive. If you can.

Other articles you may find interesting:

Can I Protect My Daughter’s Inheritance from Her Loser Husband?

What Happens When Real Estate Is Inherited?

State Taxes on Retirees Differ by Type of Retirement Income

Retirement income taxes due
Every state has its own method of taxing certain types of retirement income.

Did you know that based on the state in which you decide to retire, your state income tax bill could vary by several thousands of dollars? However, it’s not only a state’s tax rate that’s important. In addition, the type of income you get in retirement, frequently has a greater effect on your state tax liability than the tax rate you pay.

That’s because each state has its own method of taxing certain types of retirement income, explains Kiplinger’s article “State Taxes on Retirees Differ by Types of Retirement Income.” The article examines the way in which states tax two common forms of retirement income: Social Security benefits and retirement plan payouts.

First, let’s look at the taxes on Social Security benefits. While the federal government taxes up to 85% of Social Security benefits, most states don’t tax Social Security benefits at all. Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming don’t tax these benefits because they simply don’t have an income tax. New Hampshire and Tennessee only tax interest and dividends.

Social Security benefits are exempt from tax in the District of Columbia and 28 states (AL, AZ, AR, CA, DE, GA, HI, ID, IL, IN, IA, KY, LA, ME, MD, MA, MI, MS, NJ, NY, NC, OH, OK, OR PA, SC, VA, and WI). The remaining 13 states may tax some of Social Security benefits. New Mexico, Utah, and West Virginia currently tax Social Security benefits to the same extent they are taxed on the federal return. However, West Virginia will begin phasing out its tax on Social Security benefits in 2020. Taxation of Social Security benefits in the remaining states (CO, CT, KS, MN, MO, MT, NE, ND, RI and VT) depends on a person’s income and on your filing status in many instances.

There are also some states that totally exempt Social Security for taxpayers under specific income thresholds. For example, Kansas says that Social Security benefits are completely exempt from state tax, if your federal adjusted gross income (AGI) is $75,000 or less, regardless of your filing status.  Beginning this year in North Dakota, single residents can fully exclude Social Security benefits from state taxable income, if their federal AGI is $50,000 or less. Married North Dakota residents filing a joint return can claim the exclusion with a federal AGI of $100,000 or less. Missouri has partial exemptions for joint filers with federal AGI above $100,000 and all other filers with AGI over $85,000. Missouri taxpayers with income below these thresholds can get a full state tax exemption. The rest of the states have specific formulas for deciding whose Social Security benefits are taxed and to what extent.

State taxation of payouts from retirement plans, such as pensions, IRAs and 401(k)s, can be more complex. The states without an income tax (FL, AK, NV, SD, TX, WA, WY) or that just tax interest and dividends do not tax retirement plan payouts. However, in other states, there are a wide variety of rules. Mississippi and Pennsylvania generally don’t tax any retirement income. However, California, Washington, D.C., Nebraska, and Vermont have slight or no tax breaks for retirement plan payouts. Many of the states in between offer credits or deductions that can run from a few hundred dollars to tens of thousands of dollars. Georgia has the largest tax break with a $65,000 retirement-income exclusion for anyone age 65 and older (couples can shelter up to $130,000).

To make it more complicated, some states differentiate based on the type of retirement plan. Take Kansas, for example. It exempts income from government pensions but taxes private pension payouts. Alabama taxes defined-contribution plan distributions but not private pension payouts.  Beginning this year, North Dakota exempts military retirement pay but not other retirement plan payouts.

But keep in mind that a state’s or city’s property and sales taxes could outweigh any benefit you receive by paying lower or no income taxes. And some states will tax your estate and/or your beneficiaries when you die. If you’re considering moving to another state due to taxes, meet with an experienced tax professional in that state to get a clearer picture of your particular situation.

Reference: Kiplinger (October 28, 2019) “State Taxes on Retirees Differ by Types of Retirement Income”

Other articles you may find interesting: 

Why are Seniors So Vulnerable to Scammers?

IRS Scams: What You Need to Know

Can I Deduct Long-Term Care Expenses on My Tax Return?

Long-term care expenses may be tax deductible
You can deduct unreimbursed costs for long-term care as a medical expense, including eligible expenses for in-home, assisted living and nursing-home services. But certain requirements must be met.

If you need long-term care, you may be able to deduct some of your long-term care expenses on your tax return. If you purchased a long-term-care insurance policy to cover the costs, you may also be able to deduct some of that. Retirement planning entails long-term care, so it’s critical to know how these tax deductions can help offset overall costs.

Kiplinger’s article, “Deduct Expenses for Long-Term Care on Your Tax Return,” explains that you can deduct unreimbursed costs for long-term care as a medical expense, including eligible expenses for in-home, assisted living and nursing-home services. However, certain requirements must be met. The long-term care must be medically necessary and can include preventive, therapeutic, treating, rehabilitative, personal care, or other services. The cost of meals and lodging at an assisted-living facility or nursing home is also included, IF the main reason for being there is to get qualified medical care.

The care must also be for a chronically ill person and given under a care plan prescribed by a licensed health care practitioner. A person is “chronically ill,” if he or she can’t perform at least two activities of daily living—like eating, bathing or dressing—without help for at least 90 days. This condition must be certified in writing within the past year. A person with a severe cognitive impairment is also deemed to be chronically ill, if supervision is needed to protect his or her health and safety.

To claim the deduction, you must itemize deductions on your tax return. Itemized deductions for medical expenses are only allowed to the extent they exceed 10% of your adjusted gross income in 2019. An adult child can claim a medical expense deduction on his own tax return for the cost of a parent’s care, if he can claim the parent as a dependent.

The IRS also permits a limited deduction for certain long-term-care insurance premiums. You must submit an itemized deduction for medical expenses, and only premiums exceeding the 10% of AGI threshold are deductible in 2019. Further, the insurance policy itself must satisfy certain requirements for the premiums to be deductible. For instance, it can only cover long-term-care services. This limitation means the deduction only applies to traditional long-term-care policies, rather than hybrid policies that combine life insurance with long-term-care benefits. The deduction has an age-related cap.

These deductions are typically not useful for people in their fifties or sixties but can be valuable for people in their seventies and older. That’s because income tends to drop in retirement, so the deductions can have a greater overall impact on tax liability. As you age, you’re also more likely to have medical expenses exceeding 10% of AGI. Those deductions could move your total itemized deductions past the standard deduction amount. The chances of satisfying the medical necessity requirements for the care costs deduction also increase with age, and the cap for the premium deduction levels off after age 70.

Reference: Kiplinger (September 4, 2019) “Deduct Expenses for Long-Term Care on Your Tax Return”

Other articles you may find interesting: 

Know Your Rights as LGBT Residents in Nursing Homes

How Does the IRS Know if I Gift My Grandchildren Money?

How Will The 2020 SECURE Act Affect You?

SECURE Act of 2020
The 2020 SECURE Act will affect nearly everyone’s retirement and estate planning.

The Setting Every Community Up For Retirement Enhancement (SECURE) Act became effective Jan. 1, 2020, and it will affect nearly everyone in some way. Like any huge tax bill, there are things that some people will like and some people will hate. Here are some of the provisions that most people will want to know:

Some of the good news:

  • Required Minimum Distribution (RMD) change. If didn’t turn 70 1/2 in 2019 or earlier, you don’t have to take your first RMD until you turn 72. Just like the RMD rules that have been in place for years, you could delay taking that first RMD until April 15th of the calendar year after you turn 72, but you’d also have to take a second RMD before December 31st of that same year.
  • Contributions to Traditional IRA Change. Until now, you couldn’t make contributions to your Traditional IRA once you hit the calendar year in which you turned 70 1/2. The SECURE Act removed that age limit, and, as long as you have earned income, contributions can be made at any age.
  • New Exception To The 10% Early Withdrawal Penalty. Up to $5,000 can be distributed penalty-free from an IRA or from a qualified plan as a “Qualified Birth or Adoption Distribution.” It has to taken within a year after the birth or adoption, and, as of now, it appears that it’s not a one-time-only deal and can be used following subsequent births or adoptions.
  • New Qualified Education Expenses for 529 Plans. Under the SECURE Act, 529 plans can now be used to pay for expenses related to certain Apprenticeship Programs and a lifetime amount of $10,000 can be used to pay the principal and/or interest of qualified education loans. The $10,000 lifetime limit on student loan debt is a per-person limit, and in addition to using the funds in a 529 plan to pay for the 529 plan beneficiary’s debt, an additional $10,000 may be distributed as a qualified education loan repayment to satisfy outstanding student debt for each of a 529 plan beneficiary’s siblings. This change is effective retroactive to the beginning of 2019.
  • Bigger Tax Credits for Small Employers who Establish Employee Retirement Plans. Employers with less than 100 employees who establish a small business-sponsored retirement plan, such as a 401(k), 403(b), SEP IRA or SIMPLE IRA may be eligible for a tax credit of of $500-$5000.

Some of the bad news:

  • Elimination of the “Stretch IRA” Provisions for Most IRA Beneficiaries. This is a game-changer for many parents and children. Under current tax law, children who inherit an IRA from a parent could stretch out the required minimum distributions (RMDs) over their own life expectancies, thereby taking advantage of tax-deferred growth and spreading out the tax consequences. Now, under the SECURE Act, if you die in 2020 or later, your adult children beneficiaries will have no annual RMDs, but will be required to withdraw the entire amount in a lump sum in 10 years! Beneficiaries who are spouses, disabled per IRS regulations, or are less than 10 years younger than the IRA owner will still be able to stretch out their RMDs. But the trusts many people use to control IRA distributions to their children may now not work as they intended. The IRS has not addressed this specific issue yet.

This is just a rough outline of some of the provisions included in the law and don’t include a lot of the details. Contact your financial advisor if you have questions about how the SECURE Act may affect your retirement plan. If you named a trust or a sub-trust as a beneficiary of your IRA, contact your estate planning attorney to discuss your options.

Other articles you may find interesting:

Your “Simple” Estate Plan May Destroy Your Family

What If You’re Asked to Be a Trustee

 

Savings Bonds Pitfalls

U.S. Savings Bonds
U.S. Savings bonds (War bonds) have been around since 1941. While few people invest in them now, your parents may own them and they can present some problems at death.

Do you or a loved one own savings bonds? If so, you might want to read this article because you may not know about some of the problems they can create.

For younger people who might not know what a savings bond is, it’s a debt instrument secured by the U.S. government. A debt instrument, also known as a bond, is evidence that you loaned the bond issuer money and are entitled to receive interest and, eventually, the return of the money you loaned. These particular bonds are issued in small amounts, from $25 to $10,000 to individuals.

They were first issued in 1941. At that time, they were called “war bonds” and patriotic advertising was used to induce people to buy them. War bonds – bonds issued by the federal government to help pay for wars, have actually been around since the beginning of our country. But, unlike previous wars, after WWII the bonds never went away; they just got a new name. For a long time, they were very popular gifts for birthdays and weddings, and many large employers offered employees the option to buy savings bonds with part of their paychecks. But their popularity has declined over the years.

Savings bonds used to be issued as small paper certificates (actually, they were printed on card stock) which made them easy to give as gifts or to collect in a safe deposit box. But now they are only issued electronically. Savings bonds are very safe because the payment of interest is guaranteed by our federal government. Of course, because they are so safe, the interest rate on them is very low. When a paper savings bond matures, the holder can cash them in at a local bank (called “redeeming”). Taxes on the interest are due in the year the bond is redeemed.

So, many people over the age of 60 have these paper savings bonds lying around – in desk drawers, in safe deposit boxes, under mattresses, or even stuck in books and in other hidey-holes around their homes. They may be registered in the name of one individual, joint with one or more co-owners, or in the name of an individual with a named beneficiary. If a joint owner or beneficiary is alive when an owner dies, there’s no problem. Just submit some paperwork to get the bond re-issued (electronically) in the correct name. But if the bond is only in the deceased person’s name, or everyone named on the bond is deceased, things get a bit trickier.

Treasurydirect.com has all the rules and forms needed, but the bottom line is that the bonds are subject to your state’s probate laws. If no probate for the rest of the estate is needed under state law and the total redemption value of all the bonds is less than $100,000, you can likely work directly with the Treasury Dept. Otherwise, the bonds will go through your state’s probate process.

Most people try to avoid probate, if they can, to make things easier on their loved ones. So, is there a way to avoid a potential probate if someone owns paper savings bonds? Perhaps. But every change to a paper savings bond now requires that the owner open an online account. Many older people aren’t comfortable with this.

To add a beneficiary, paper bonds can be converted to electronic bonds, and a beneficiary can be named once the bond shows up in the online account. To add a joint owner or change the owner to a revocable living trust – same process, except the Treasury Dept. considers that a change of ownership, and the current owner will owe taxes that year on all the interest accrued to the date of the ownership change. The same goes for ownership changes due to divorce.

And here’s the fun part – the IRS requires YOU, the owner, to keep track of all of that because when you do eventually redeem paper bonds where ownership was changed (maybe years ago), the 1099 you receive from the Treasury will show all of the interest from the original issue date to the final redemption date – and the IRS will be looking for the tax due on the entire amount! And do-it-yourself tax preparation programs, such as TurboTax, don’t have the capability to deal with explanations to the IRS about taxes already paid (as I found out the hard way when I did my Mom’s taxes).

The treasurydirect.com website has a ton of useful information and all the forms you’ll need. Savings bonds certainly serve a purpose for risk-averse investors, but just be aware that the paper form of these bonds can create some headaches. Ask your parents now whether they own any savings bonds – and where they are and whose name is on them – so you don’t have a potentially nasty surprise later on.

Other articles you may find interesting:

Help Your Elderly Parent Without Ruining Your Relationship

Time to Take Over A Parent’s Finances?

Naming a Trust as the Beneficiary of an IRA

IRA beneficiary form
Sometimes naming your trust as the beneficiary of your IRA is a great idea. Sometimes it’s not.

A frequently used strategy to save for retirement is an IRA. This money is saved to fund retirement, but there’s always the possibility that you’ll die before all the money is withdrawn. That means you must plan for what happens to that money after you are gone. Designating a trust as your IRA beneficiary is one option. It provides you with maximum control over the distribution of your assets after you die.

KTVA.com’s recent article, “How to Name a Trust as Beneficiary of an IRA,” discusses some of the important elements of naming a trust as an IRA beneficiary. Naming a trust as a beneficiary requires careful planning, so work with an experienced estate planning attorney.

Naming a trust as the beneficiary of your IRA gives you much more control over the funds because trusts use written instructions for how and when the money should be paid out. Designating a trust as the beneficiary of an IRA also lets you enjoy the tax benefits of an IRA while still maintaining maximum control of funds.

This is also a good move for a person who wants to leave her IRA to a beneficiary who may need some additional direction, like a minor child, a spendthrift child or spouse, or a person with special needs. Naming a trust as your beneficiary also shields the funds from creditors—a great estate planning strategy if your state doesn’t protect inherited IRAs.

However, naming a trust as a beneficiary of your IRA probably isn’t the best choice if you want your retirement savings to go to your spouse. Spouses who inherit IRAs are able to roll the deceased’s IRA into their own IRA account, tax-free. If you want your spouse to inherit your IRA with no strings attached, designate your spouse as the primary beneficiary of your IRA.

There are several requirements that must be met when designating a trust as the beneficiary of your IRA. They include the following:

  • It must be a valid trust under state law;
  • The trust must be irrevocable (or become so upon your death);
  • The trust’s beneficiaries must be individuals; and
  • The trustee must provide a trust document or certified list of beneficiaries to the IRA’s custodian or trustee by October 31st of the year after your death.

However, there are some drawbacks to doing this: the expense of structuring and maintaining the trust and designating a trust as the beneficiary of your IRA are much more complicated than simply naming a beneficiary of your IRA.

You also forfeit the ability for your spouse to roll over the IRA into his own IRA tax-free. This cancels out some of the tax benefits, because if you didn’t designate a trust as the beneficiary—and the IRA funds just rolled over—the tax-advantaged account would grow more quickly. But it also prevents your spouse from naming his new spouse or lover as the beneficiary on what used to be your IRA.

Keep in mind that just because a trust is named as the beneficiary of an IRA doesn’t mean the assets are transferred to the trust—they shouldn’t be. Instead, they should remain in the IRA to take advantage of the account’s tax benefits until distribution of the assets begins.

To set up a trust as the beneficiary of your IRA, you’ll need the help of a qualified estate planning attorney. Mistakes can be costly.

Reference: KTVA.com (July 15, 2019) “How to Name a Trust as Beneficiary of an IRA”

Other articles you may find interesting:

How Much Money Should I Provide My Child with Special Needs?

Using a Trust for Your Children’s Inheritance Plan

Roth IRA Tips and Tricks

Roth IRA
Roth IRAs are powerful tools in your retirement planning arsenal.

There’s a lot that most people don’t know about Roth IRAs, as detailed in the article “9 Surprising Facts About Roth IRAs” from the balance. Some of them may surprise you.

Roth IRA contributions can be used for emergencies. In a perfect world, no one would ever need to use retirement money for anything but retirement, but because Roth contributions are not deductible, they can be withdrawn at any time, for any reason, without taxes or penalties. A Roth IRA can serve as an emergency fund. However, it needs to be noted that the funds you can withdraw do not include amounts that were converted to a Roth IRA or investment gains. Therefore, if you put $5,000 into a Roth IRA that grew to $6,000, you may only withdraw the $5,000 without taxes and penalties.

You might be able to use a non-deductible IRA to fund a Roth. If you make over a certain limit, you can’t contribute to a Roth IRA—or can you? Some people who keep other retirement money inside qualified retirement accounts are permitted to make a non-deductible IRA contribution every year and then convert that into a Roth. This is sometimes called the “backdoor Roth.” However, you’ll need to be careful, and you may need help. In some cases, you can even roll a self-directed IRA back into a company plan, so in future years you could use the backdoor Roth strategy without having to pay taxes on the converted amount. Get a professional to help you with this: mistakes can be expensive!

You may roll after-tax 401(k) contributions into a Roth IRA. Many employer plans let you make after-tax contributions and then, at retirement, these after-tax contributions can be rolled into a Roth IRA. Any investment gain on the after-tax contributions can’t go into the Roth, but the contributions can.

Roth IRAs have no RMDs (Required Minimum Distributions). There aren’t any age requirements for when you take money out, so there are no delayed tax bombs lurking. However, non-spouse heirs will have to take required distributions from an inherited Roth. The nice thing: they will be tax free.

You can contribute to both a SIMPLE IRA and a Roth IRA. As long as your income is within the Roth IRA limits, then you can contribute to both the SIMPLE and the Roth. The contributions to the SIMPLE IRA will be deductible, the Roth contributions will not be. This dual funding strategy lets you reduce taxable income now and have funds in the Roth accumulate for tax-free benefits in retirement. For the self-employed person, who is diligent about saving for retirement, this is a good plan.

Your employer plan may allow Roth contributions. Many 401(k) plans let you make Roth contributions. They are called “designated Roth accounts.” Check with your HR department to see if their plan let you choose which type of contribution to make. Some may be all or nothing, while others let you do some of each.

Age is not the key factor in determining whether or not to use a Roth IRA. The primary deciding factor here is your income bracket, your tax rate now and your expected tax rate during retirement. If your expected tax rate during retirement will be lower, the deductible contributions may be better. If your tax rate during retirement is going to be the same or higher in retirement, which is often the case for people with large IRAs or 401(k)s, then a Roth IRA may make a lot of sense, regardless of your age.

You might be able to make a spousal Roth contribution. Even if your spouse has no earned income, as long as you have an earned income, you can make an IRA contribution on their behalf. Many couples can double their tax favored retirement account savings by doing this.

Be careful about Roth conversions. As stated previously, mistakes here can become expensive, so don’t rely on online Roth calculators to manage conversions. Talk with an experienced professional who can help make sure that your numbers and your strategy fits with your personal retirement scenario. Every person and every situation is different, so planning needs to be specific to your needs.

Reference: the balance (August 13, 2019) “9 Surprising Facts About Roth IRAs”

Other articles you may find interesting:

Avoiding the Epic Fail of a Business Succession Plan

How Do Transfer on Death Accounts Work?

How Much Money Should I Provide My Child with Special Needs?

A child with special needs
It can be hard to determine how much money you should leave for the care of your child with special needs, but the first step is to create some sort of a plan.

One of the toughest things about planning for a child with special needs is trying to calculate the amount of money it’s going to take to provide while the parents are alive and after the parents pass away.

Kiplinger’s recent article asks “How Much Should Go into Your Special Needs Trust?” The article explains that it’s not uncommon for parents to have done some estate planning, but not necessarily special needs estate planning. They haven’t thought about how much money they should earmark to fund their child’s trust or which assets would be the best to use.

Special needs estate planning often involves creating a type of trust which will allow a person with a disability to continue to receive certain public benefits while avoiding complete impoverishment. Typically, ownership of assets more than $2,000 would make the individual ineligible for certain public benefits. But assets held in a special needs trust (SNT) don’t count toward this amount.

A child with special needs can generate a lot of expenses over his or her lifetime. The precise amount will be based on the needs and lifestyle of your family, as well as your child’s capabilities. When you die, this budget must be increased because the things you did for free must now be paid for.

An SNT often isn’t funded until the parents’ death. At that point, the trust would file a tax return each year and pay taxes at the higher trust tax rates. There are also legal and trust administration expenses to think about. But the public program benefits your child receives can, in many cases, offset many of the above-mentioned costs.

It’s vital to conduct a complete analysis of the future costs of providing for your child with special needs so you can start saving and making adjustments in your financial and estate planning. The Kiplinger article provides some great information about how to start thinking about the realities of your child’s future needs.

Speak with an elder law or estate planning attorney about the different types of special needs trusts.

Reference: Kiplinger (June 10, 2019) “How Much Should Go into Your Special Needs Trust?”

Other articles you may find interesting:

ABLE Accounts: No More Medicaid Recovery

Special Needs, Special Trusts: SNT FAQs

Not Your Grandfather’s Senior Community

Active senior community
Seniors are seeking more active retirement communities.

One 78-year-old woman wanted to compete in a triathlon, so she headed over to the pool at her retirement community and joined a training team. Another 86-year-old woman logs 10 miles twice a week on one of the same retirement community’s spin bikes. That’s what a senior living community that also offers assisted living and skilled nursing care looks like today, reports considerable.com in the article “The rise of ‘cool’ senior living communities.”

Other communities have been created on or near college campuses, where residents can take classes, attend school concerts or sports games, hang out with students and get care if and when they need it. There are also the upscale high-rises that feel more like resorts or healthcare spas.

Active adult communities for those 55+ are transforming themselves into cool, desirable places to live a busy lifestyle. There are now two of Jimmy Buffett’s “Latitude Margaritaville” communities in Florida and another in South Carolina.

Today’s seniors don’t want a bland community, and their children don’t want to see their parents in one. Senior providers know that if they want to succeed, they must stand out from the competition. They’ve got their eye on the 76 million baby boomers who are prospective residents. They know that these prospects are radically redefining aging, just as they have every other stage of life.

An even bigger challenge — most people want to age in their own homes and not move at all.

More senior living communities are also offering opportunities for residents to interact with people of all ages. One community has programs for all ages, a Saturday pop-up café, and more than 40 organizations meet at the center regularly. The community has positioned itself as a gathering place for all members, young and old, to combat isolation and bring people together.

Some retirement communities are built on properties that are mixed-use with the same purpose of not isolating seniors. One community in Alabama will have a center for well-being, open to residents and the public, with physicians, nutritionists, wellness coaches, chiropractors and alternative therapies from salt rooms to infrared saunas. A co-working area and research space for partnerships between healthcare providers, local medical schools and universities and biotech companies will be offered.

For those with seawater in their veins, there is a cruise ship that has been retrofitted with more than 600 condo living units. For wine enthusiasts, one company in California’s Sonoma wine country is partnering with a Zen center to build a facility that will offer meditation classes, workshops and retreats, as well as independent and assisted living and memory care.

No matter what your interests are, chances are there’s a new, cool retirement community with your interests and lifestyle in mind.

Reference: considerable.com (May 24, 2019)“The rise of ‘cool’ senior living communities”

Other articles you may find interesting:

Do I Need to Update My Estate Plan if I Relocate?

Naming a Child as Successor Trustee?