Written by Robert T. Nickerson
No one ever said that the process of divorce was going to be easy. It require an amount of time to pick up the pace, but for woman, they can be targeted as the most affected financially. As said in a report by the UBS Global Wealth Management, about 56% of married women rely on their significant others to deal with financial arrangements and investments. Because of this, it's easy for many women to feel overwhelmed during a divorce.
Emotion will cloud a lot of more rational decisions that need to be made. It's important to stay focused on maintaining certain issues. This includes making financial choices, especially if you still have children, regardless of age.
There are a lot of other problems that will arise, such as custody and property distribution that'll require immediate attention. The future and your plans for it are just as important and also need to be looked into. It's never too early to approach to deal with this task that's often pushed aside (do it for your children). So here are some good pitfalls to avoid that many divorcing people do.
1. Not Reassessing Their Current Will
Now that your no longer married, you'll have to look at your old will to see what needs to be changed. This applies to assets and an update will reflect that. If your significant other was a beneficiary, then that will need to be changed to avoid trouble in the long run.
2. Not Looking Again at Your Children's Guardianship Plan
None of us like the idea of seeing someone else raising our children. However, this is crucial in order to plan for the worst. If a guardian is not selected, it's hard to tell which person, even if their close, would acquire custody of the kids of you were to die. If your husband had made a guardianship plan before, it may be a good time to rethink that. The previously chosen guardian may be a former spouse's family member or a close friend.; someone that your no longer confortable with. Your now in a position where only you can make that decision. This is something that needs to be decided on before something should happen to you. If you don't want that person to be a former spouse, you need to find someone else immediately.
3. Not Planning for All Assets
Chances are, you may be awarded a portion of your former spouses deferred savings, like a 401, IRA, or some other savings plan. Many divorced woman are not aware with how many assets they had when they were married.
Once you have a better look at your fair share, it's needed in order to plan the exact amounts for your beneficiaries for those assets, which is already a crucial part of your estate plan.
4. Failing to Incorporate Trusts Into Their Estate Plan
You never know what's going to happen and trusts can help prepare your assets in various situations, especially if you have adult children. For example, your adult children may have credit issues or their own divorces. Having a trust ready can guarantee that your cash will still go to whomever you want it to go. Trusts can even be used for other things like postponing distribution until your children are eighteen.
5. Failing to Plan at All
The single biggest mistake someone can make is having nothing planned at all. According to a 2016 Gallup poll, Nearly 60% of Americans don't have a will or an estate plan in place. There's a lot of people that believe that their assets will automatically go to their next of kin, which is untrue. Unless if something is set up, the assets will go into probate, which is a timely and costly process. This will set up your children into spending a lot of money in order to see any of those assets. All this will do is cause more pain. While various states have their own probate laws, most are left to either receiving little or no assets at all. It's always important to have an estate plan in place, even if that’s not on you mind.
6. Not Seeking Help from a Professional
A lot of woman who are unfamiliar assume they can do it by themselves. A financial advisor who understands estate planning can be valuable during this time. It's also advised that you seek out an experienced lawyer who specializes in estate planning. Avvo and Justia are good places to begin looking and can even narrow your search based on your location and needs. Without a professional, this could make you overlook area you could benefit from.
Stan Lee, the creator of Marvel Comics and several superheroes like Captain America, Iron Man, Hulk, and Spider-Man died with a lot of problems left behind. Not even Spider-Man can untangle this web.
The 95-year-old former publisher and chairman had a lot of problems, wren with his surviving 68 year old daughter J.C. Lee. His wife of 70 years died in July 2017, was accused of sexually harassing his home staff and nurses, and around 1.4 million dollars when missing from his accounts. He accused that some of the money, around $850,000, was misappropriated to buy a condo.
During this time, he had developed relationships with business advisors and attorneys and broken up with them. To quote from an interview with the Dailey Beast, "I learned later on in life, you need advisors if your making any money at all", adding that he did little money management in the beginning of his career. He also said, "But then, a little money stared coming in, and I realized that I needed help. And I needed people I could trust. And I had made some mistakes. And my first bunch of people were people that I shouldn't have trusted.
Estate Planning can be a hard, nerve wrecking process with a lot of emotional decisions needed to me made. Whether he had a will or trust in place in uncertain. Several late celebrities such as Prince and Aretha Franklin failed to plan, forcing their families or beneficiaries to deal with the complicated court system. This alone can take years to figure out a solution.
For most normal people, estate planning is uncomplicated. There are some rules that everyone planning their will or trust should understand. This includes disability or incapacity, re-considering beneficiaries, and composing defining documents (like a power of attorney).
Making a plan is one thing. Keeping up with it and making sure it's updated as the person in question can be more difficult, as natural decline in cognitive happens, or at least someone in the family or business world accuses them of so. Unfortunately for Stan Lee, the Marvel Comic creator had been a victim of similar accusations. Back in February, he signed a document that said his adult daughter spent too much money, had been yelled at and made acquaintances with three men who had every notion to take advantage of him, the Hollywood Reporter said. Once the document was notarized, Lee vetoed the piece of paper. It's best to communicate with the whole family so that a similar situation doesn't happen with yours. Seniors become less self-reliant, and it becomes easier to get inspiration from people that may have other intentions. It's much easier to set up a plan for the long run.
It's likely that Stan Lee's family will have to deal with the numerous documents flying from several places, thanks to his years of relationships and business enterprises he originated. This could result in many people coming forward to claim "I'm supposed to be here for this" or "I was promised this thing from Stan Lee".
Even if your not a millionaire or made a bunch of superheroes should be willing to prepare for tomorrow. When working with financial advisors, money managers, and attorneys, here are some questions to consider asking;
With the baby boomer generation about to transfer most wealth into Generation X and Millennials, many are figuring out how to initiate the movement of their original property to their children and any other trustees.
While some assets like money, bonds and stocks are common and rarely a problem, physical property like homes, art, and gold can be more complicated. As people don't usually keep track on record about their assets, it's worth is either dated or not even known. Family members often have different ideas on what next steps to take. They don't even know how to have a sit down to figure it all out.
Because of this notion, these physical effects are overseen, even with it's potential worth. Like with stock and bonds, certain assets require a plan that starts with decision makers, advisors, and possible outside sources. In order to figure out the course of action, here are some questions to answer.
How Much is it Worth?
You need to come across a market value of a piece of property, no matter if you want to pass down the asset itself or profit some the sale of it. This is the root for a lot of plans, because it attaches a locked number for something that could have changed in value over time.
For example, lets say a collection of gold coins was worth around $20,000 when it was appraised. Calculate an additional thirty years of time, making it somewhere around $90,000 once its owner is ready to retire. Not only is it important to get an idea of its current worth for insurance purposes, but also with estate planning, ensuring accurate details that won't become a problem in the long run.
When the time is right, check your local listings for a professional appraiser, especially for material like art or anything can be seen as collectable. Believe it or not, there is a financial risk to setting values that could evolve into something bigger. Do simply go to Wikipedia or a free online guide written by a college-aged troll who may not understand apprising, due to misinformation.
It is essential to find an appraiser who is certified by accredited organizations, such as the International Society of Appraisers or The Appraisers Association of America. It's more important for a large accumulation; the price of an appraiser is worth it in the long run to understand value and how that could impact an estate plan.
Who Wants It?
Going further then property value, we have to consider it's emotional or nostalgia value. Consider something like a vacation home that may have a strong attachment to you, it may have a bigger connection your children who had a lifetime of memories there.
In the case of multiple beneficiaries are going for the same asset, you'll need to think about how it can be split up. If an agreement cannot be made, then you'll have to figure out how to divide your other property to make up for it. In a lot of cases, it may be easier to organize a buyout situation that would legally transfer ownership to the trustees what desire it.
Remember that markets for physical assets can be periodical, so time is also a factor for the marketability of a sale. Going back to the summer home, let's imagine that the beneficiary was given the home by his grandparents. The one who designed the home may have been a friend and though the grandson know it was valuable, but had no idea of it's worth. It's possible that the designer was popular and it's appraiser knew it was more worthy then expected. In this case, the grandson was able to sell it in a good market and generate a higher number of liquid assets.
How Can it be Passed on?
You have a number of options to pass on physical property. It's usually the better choice to allow a beneficiary to inherit the asset. That asset will receive a boost in cost that can help with the capital gains tax burden, even if its sold. It's also doable to put the property into a trust, a family partnership or an LLC and set the ownership of it in an efficient way for taxes, saving more in later estate taxes. In the worst case, if you don't feel like you can trust your heirs to take on that responsibility, then you can sell it yourself, pay the tax, and hand it over as a liquid asset.
Because of the emotional stress of deciding physical assets, families will often put off this conversation until it's too late. But ignoring these things can create problems in the long run. Talking about these plans can make the process easier once the time comes.
No one likes to think about the possibility of their own disability or the disability of a loved one. However, as the statistics below demonstrate, we should all plan for at least a temporary disability. This issue of The ElderCounselorTMexamines the eye-opening statistics surrounding disability and some of the common disability planning options. Disability planning is one area where we can give each and every person and family we work with great comfort in knowing that, if they or a loved one becomes disabled, they will be prepared.
Most Individuals Will Face At Least a Temporary Disability
Study after study confirms that nearly everyone will face at least a temporary disability sometime during their lifetime. More specifically, one in three Americans will face at least a 90-day disability before reaching age 65 and, according to the definitive study in this area, depending upon their ages, up to 44% of Americans will face a disability of up to 4.7 years. On the whole, Americans are up to 3.5 times more likely to become disabled than die in any given year.
In raw numbers, over 37 million Americans, or roughly 12% of the total population, are classified as disabled according to the 2010 census. Perhaps surprisingly, more than 50% of those disabled Americans are in their working years, from 18-64. For example, in December 2012, according to the Social Security Administration more than 2.5 million disabled workers in their 20s, 30s, and 40s received SSDI (i.e., disability) benefits.
Many Persons Will Face a Long Term Disability
Unfortunately, for many Americans the disability will not be short-lived. According to the 2007 National Home and Hospice Care Survey, conducted by the Centers for Disease Control's National Center for Health Statistics, over 1.46 million Americans received long term home health care services at any given time in 2007 (the most recent year this information is available). Three-fourths of these patients received skilled care, the highest level of in-home care, and 51% needed help with at least one "activity of daily living" (such as eating, bathing, getting dressed, or the kind of care needed for a severe cognitive impairment like Alzheimer's disease). The average length of service was more than 300 days, and 69% of in-home patients were 65 years of age or older. Patient age is particularly important as more Americans live past age 65. The U.S. Department of Health and Human Services Administration on Aging tells us that Americans over 65 are increasing at an impressive rate:
The Department of Health and Human Services also estimates that 9 million Americans over age 65 will need long term care this year. That number is expected to increase to 12 million by 2020. The Department also estimates that 70% of all persons age 65 or older will need some type of long term care services during their lifetime.
The Council for Disability Awareness provides startling examples of how disability is likely to impact “typical” Americans.
“A typical female, age 35, 5’4", 125 pounds, non-smoker, who works mostly an office job, with some outdoor physical responsibilities, and who leads a healthy lifestyle has the following risks:
“A typical male, age 35, 5’10", 170 pounds, non-smoker, who works an office job, with some outdoor physical responsibilities, and who leads a healthy lifestyle has the following risks:
The Alzheimer's Factor
Alzheimer's is growing at an alarming rate. Alzheimer's increased by 46.1% as a cause of death between 2000 and 2006, while causes of death from prostate cancer, breast cancer, heart disease and HIV all declined during that same time period.
The 2015 Alzheimer's Association annual report titled, “Alzheimer's Disease Facts and Figures” explores different types of dementia, causes and risk factors, and the cost involved in providing health care, among other areas. This report contains some eye-opening statistics:
Caregivers are at risk of developing health problems. There were approximately 10.9 million unpaid caregivers (family members and friends) providing care to persons with Alzheimer's or dementia in 2009. According to the Alzheimer's Association, those persons are at high risk of developing health problems, or worsening existing health issues. For example, family and other unpaid caregivers of people with Alzheimer's or another dementia are more likely than non-caregivers to have high levels of stress hormones, reduced immune function, slow wound healing, new hypertension and new coronary heart disease.
Spouses who are caregivers for the other spouse with Alzheimer's or other dementia are at greater risk for emergency room visits due to their health deteriorating as the result of providing care. A study mentioned in the 2010 Alzheimer's Association report found that caregivers of spouses who were hospitalized for dementia were more likely than caregivers of spouses who were hospitalized for other diseases to die in the following year.
Receiving care. According to the National Nursing Home Survey 2004 Study, the most recent of its kind, the national average length of stay for nursing home residents is 835 days, with over 56% of nursing home residents staying at least one year. Significantly, only 19% are discharged in less than three months. Those residents who were married or living with a partner at the time of admission had a significantly shorter average stay than those who were widowed, divorced or never married. Likewise, those who lived with a family member prior to admission also had a shorter average stay than those who lived alone prior to admission.
While a relatively small number (1.56 million) and percentage (4.5%) of the 65+ population lived in nursing homes in 2000, the percentage increased dramatically with age, ranging from 1.1% for persons 65-74 years to 4.7% for persons 75-84 years and 18.2% for persons 85+. According to the U.S. Census Bureau, 68% of nursing home residents were women, and only 16% of all residents were under the age of 65. The median age of residents was 83 years.
See Vol. 4 Issue 5 of the Elder Counselor, The Affordable Care Act: How It Impacts Our Senior Population, for a discussion of the Affordable Care Act’s Impact on information regarding nursing homes.
Long Term Care Costs Can Be Staggering
Not only will many individuals and families face prolonged long term care, in-home care and nursing home costs continue to rise. According to the Genworth 2015 Cost of Care Survey, Assisted Living, Adult Day Services, and Home Care Costs national averages for long term care costs are as follows:
Most Americans Underestimate the Risk
Perhaps most importantly, despite overwhelming and compelling statistics; most Americans grossly underestimate the risk of disability to themselves and to their loved ones. According to the Council on Disability Awareness 2010 survey:
Given the high costs of care, this underestimation often leaves Americans ill prepared to pay for the costs of long term care.
Long Term Care Insurance May Cover These Costs
If a parent, their spouse, or family member needs long term care, the cost could easily deplete and/or extinguish the family's hard-earned assets. Alternatively, seniors (or their families) can pay for long term care completely or in part through long term care insurance.
Most long term care insurance plans let the individual choose the amount of the coverage she wants, as well as how and where she can use her benefits. A comprehensive plan includes benefits for all levels of care, custodial to skilled. Clients can receive care in a variety of settings, including the person's home, assisted living facilities, adult day care centers or hospice facilities.
Planning in the Event Long Term Care Insurance is Unavailable or Insufficient
Unfortunately, many older Americans will either be medically ineligible for long term care insurance or unable to afford the premiums. In that event, more aggressive planning should be considered as early as possible to make sure life savings are not depleted as a result of having to pay out-of-pocket for care. With the help of an elder law attorney, a plan can be created that will protect much of the assets of an individual or couple that would otherwise be at risk of being depleted.
All Planning Should Thoroughly Address Disability
When a person becomes disabled; he or she is often unable to make personal and/or financial decisions. If the disabled person cannot make these decisions, someone must have the legal authority to do so. Otherwise, the family must apply to the court for appointment of a guardian over the person or property, or both. Those who are old enough to remember the public guardianship proceedings for Groucho Marx recognize the need to avoid a guardianship proceeding if at all possible.
At a minimum, seniors need broad powers of attorney that will allow agents to handle all of their property upon disability, as well as the appointment of a decision-maker for health care decisions (the name of the legal document varies by state, but all accomplish the same thing). Alternatively, a fully funded revocable trust can ensure that the senior's person and property will be cared for as desired, pursuant to the highest duty under the law - that of a trustee.
The above discussion outlines the minimum planning everyone, including seniors and their loved ones, should consider in preparation for a possible disability. It is imperative that families work with a team of professional advisors (legal, medical and financial) to ensure that, in light of their unique goals and objectives, their planning addresses all aspects of a potential disability. Our firm is dedicated to helping seniors and their loved ones work through these issues and implement sound legal planning to address them. If we can help in any way, please don’t hesitate to contact our office.
Jeffrey C. Nickerson - Estate Planning Attorney - My Passion is Special Needs Planning!