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Resources for Challenging Times

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From your Samuel Financial LLC Team

We hope you are staying safe and finding ways to make the best of your time at home during the COVID-19 public health emergency. Previously, we’ve sent an outline of the government stimulus programs to ensure you are aware of the financial help available to both individuals (unemployment, including for self-employed persons) and forgivable loans for companies (Paychecks Protection Program and others). The government’s programs also include waiving the Required Minimum Distributions from all individual and company retirement accounts and extensions of time to repay loans from company retirement plans, for just two more examples of the help available.

The government’s assistance programs are new and sometimes not clear enough. For example, many self-employed persons are not aware that they are now permitted to apply for unemployment and receive $600 per week, in addition to the amount paid by Massachusetts or other states of residence, for many weeks. If you have a question about whether you are eligible for government programs, we’d be happy to hear from you and help resolve your questions.

Courtesy of colleagues at Nationwide and our own staff, we are sharing some website resources that may help you stay well stocked, safe and maybe even entertained:

Grocery Delivery Services:

Wal-Mart Grocery Delivery                         https://grocery.walmart.com/

Amazon Prime Now Grocery Delivery       https://primenow.amazon.com/

Food Delivery Services:

Uber Eats            https://www.ubereats.com/

DoorDash           https://www.doordash.com/

GrubHub             https://www.grubhub.com/

Postmates           https://postmates.com/

CDC’s Official Website for COVID-19 Updates:

https://www.cdc.gov/coronavirus/2019-ncov/index.html

Massachusetts’s Official Website for COVID-19 Updates:

https://www.mass.gov/resource/information-on-the-outbreak-of-coronavirus-disease-2019-covid-19

Nationwide Care Concierge for Annuity Contract Owners, Spouses, Children, Parents and Parents in Law

https://nationwidefinancial.com/resources/support/annuities/nationwide-care-concierge

https://members.healthadvocate.com/Home/Index

Tips for Working at Home:

https://www.npr.org/2020/03/15/815549926/8-tips-to-make-working-from-home-work-for-you

https://www.businessinsider.com/how-to-work-from-home-during-the-coronavirus-outbreak-2020-3

https://www.cbsnews.com/news/coronavirus-pandemic-tips-for-working-from-home/

Ideas and Free Educational Materials for Kids at Home:

Scholastic’s Free Learn at Home

https://classroommagazines.scholastic.com/support/learnathome.html

Khan Academy Free Learning

https://docs.google.com/document/u/1/d/e/2PACX-1vSZhOdEPAWjUQpqDkVAlJrFwxxZ9Sa6zGOq0CNRms6Z7DZNq-tQWS3OhuVCUbh_-P-WmksHAzbsrk9d/pub

Crash Course YouTube Channel

https://thecrashcourse.com/

Best wishes from Samuel Financial LLC

Steve Samuel, Chad Gutner, Nancy Mann, Kevin Cotton, Veronica Garzone, Sarah Newell and Stephanie Gallegos

Samuel Financial LLC is located at 858 Washington Street, Dedham, MA 02026 and can be reached at 781.461.6886.  Securities and advisory services offered through Commonwealth Financial Network, member FINRA/SIPC, a registered investment adviser. Fixed Insurance products and services offered through CES Insurance Agency.

Start Your Spring Housecleaning With Some Estate Planning

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While this period of quarantine is the perfect opportunity to clean out your attic, catch up on your Netflix queue, or get in shape, this is also the time to make sure you have the appropriate legal documents in place in the event that you are not able to make or communicate your health care decisions.  These documents include a Health Care Proxy and HIPAA Authorization and many choose to also execute a Living Will

Health Care Proxy:   A Health Care Proxy is the document by which you appoint a health care agent – the person who will make health care decisions for you if you are not able to make them for yourself.  If you already have executed a Health Care Proxy, take a moment to locate it, ensure that the agent you named is still appropriate, and distribute copies (if you haven’t already) to your agent, your primary care doctor and perhaps your family members.  Most of us usually have our cell phones close by so it’s a good idea to scan a copy of your health care proxy and save it on your phone.

We also recommend that you affix a copy of your Health Care Proxy, emergency contact information and health insurance information to the side of your refrigerator.  EMTs are trained to look for emergency information there.

HIPAA Authorization:         It is also important to execute a HIPAA Authorization.  The Health Insurance Portability and Accountability Act (HIPAA) was enacted in 1996 to help ensure the privacy of your medical records.  A HIPAA Authorization is a document that authorizes your health care agent and any family members or friends you list to talk to your medical professionals and view your medical records.  Remember that once your teenager reaches age 18, they will need to execute a HIPAA Authorization authorizing you to speak with their doctors and view their medical records.  The mere fact that you are mom/dad/guardian is not sufficient.

Living Will:    Additionally, you may wish to sign a Living Will.  While Living Wills are not legally binding in Massachusetts, they provide guidance to your doctors and health care agent about your wishes regarding end of life care in the event that you have a terminal condition or are in a persistent vegetative state.

Other practical suggestions during this time of Coronavirus:

If you have a family member sick at home and at risk of being hospitalized it’s a good idea to have an emergency bag packed, since visitors are not being allowed in to the hospital. Things to include in the bag:  *

  1. Written UPDATED accurate list of medications: name, dose, frequency.
  2. Cell phone charger!
  3. List of emergency contacts and phone numbers on paper!
  4. Toothbrush, toothpaste and hair brush.
  5. Three pairs of underwear.
  6. Full name, phone number, office address of Primary Care Doctor.
  7. Book, magazine or something to read.
  8. Copy of legal paperwork such as Health Care Proxy, HIPAA Authorization and Living Will.
  9. If patient has a pacemaker or defibrillator, a copy of the pocket information card that states the brand, model number, MRI compatibility.
  10. If the patient has asthma or COPD, bring the inhalers. Hospitals are running out.
  11. Extra batteries for hearing aid or other medical devices.

These are uncertain times right now, but ensuring that your health care documents are up to date can provide some peace of mind for you and your loved ones.  If you wish to create or update your health care proxy, please contact our office.  We are working remotely but are able to speak with you over the phone or via Zoom and will meet you in the office parking lot to execute your documents.   One silver lining in all of this – we are waiving the $400 fee we customarily charge our clients for initial estate planning meetings if you make an appointment in the month of April.

Please do not hesitate to reach out with any questions.  We are happy to speak with you and to do what we can to ease your mind during this difficult time.

*With thanks and credit to Peter T. Clark Esquire of Mansfield, Massachusetts for compiling and sharing this great list!

The Dedham firm of Samuel, Sayward & Baler LLC which focuses on advising its clients in the areas of estate planning, estate settlement and elder law matters. This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney. For more information visit www.ssbllc.com or call 781/461-1020. 

March, 2020

© 2020 Samuel, Sayward & Baler LLC

Coronavirus Update & Remote Estate Planning

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Dear Clients, Colleagues and Friends,

We hope this finds you all well and safe! As promised, we want to give you an update on our plans in light of Governor Baker’s emergency order of this morning.

We are and will continue to be “open” for business as we are well-equipped to work remotely, including meeting with clients by phone or video conference. However, in compliance with the Governor’s order, we closed our physical office beginning Tuesday, March 24 at noon until Monday, May 4th (assuming we are permitted to re-open at that time), which means we will not be able to physically meet with clients to sign documents during that time.

We want you to know that we are here to help you. You are welcome to reach out to any of us by phone or email at any time. If you would like to schedule a time to speak or video conference with us, please email Jennifer Poles (poles@ssbllc.com) or Lynne Abe (abe@ssbllc.com) or call the office at 781-461-1020.

In other news, Attorney Abigail Poole of our office has been involved with proposed legislation, supported by hundreds of attorneys statewide, to allow attorneys who are notaries to conduct meetings to sign documents in a virtual manner via video conference. Keep an eye out for information about how you can support this effort by contacting your legislators.

We will continue to keep you updated as the situation evolves, and continue to wish you and your family health and safety during these uncertain times.

Suzanne R. Sayward
Maria C. Baler
Julia K. Abbott
Abigail V. Poole

How Successful Retirees Cope with Retirement’s Biggest Uncertainties

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By Sarah Newell, CFP® and Steven Joshua Samuel, JD, MBA, AIF®

With average life expectancies increasing, retirees need strategies that address a broad array of uncertainties that arise during retirements that may last three or more decades. Retirees’ top concerns elicited in the 2018 American institute of CPAs (AICPA) Personal Financial Trends Survey included:

77% Health Care Costs

53% Market Fluctuation

50% Other Unexpected Costs

42% Lifestyle Expenses

22% Being a Burden on Relatives

The AICPA survey also reported that CPAs are seeing increases (from five years ago) in the number of clients who experience long term care impact on finances ( 57%), more clients taking care of aging relatives ( 50%); and in the number of clients affected by diminished capacity of a family member ( 45%).

A change in the law in 2020 offers a bit of help to retirees. However, the best approach is still self-help through identifying specific financial goals and developing a comprehensive approach  that includes investment strategy, taxes and legal documents. Here are some thoughts about those subjects.

The SECURE Act of 2020

Although legislation alone cannot solve retiree’s major concerns, the SECURE ACT offers some help. The SECURE Act went into effect on January 1, 2020 and makes significant changes to retirement planning. Some of the key changes that affect retirees include:

Age Limit Removed for IRA Contributions

Until 2020, people over 70.5 years of age could no longer contribute to IRA accounts. Beginning in 2020, persons of any age may contribute to an IRA as along that they have income from employment. Note that contributions to company retirement plans have always been permitted by any person eligible for the plan and that remains the law.

Required Minimum Distribution ( RMD) extended to start at age 72

Until 2020, people reaching age 70.5 had to begin withdrawing money from all their retirement accounts. The SECURE act extends the RMD requirement to begin at age 72 for people who had not reached 70.5 before 2020. People who reached 70.5 before 2020 must continue to take RMDs even before age 72.

Incentives are Offered for Small Businesses to Offer Retirement Plans

Elimination of Stretch IRAs

First, a not helpful provision of the SECURE Act requires non-spouse inheritors of IRAs to deplete the entire account within 10 years of inheritance. Previously, all heirs were permitted to stretch withdrawals to the full length of their lifetimes. Second and fortunately, spouses who inherit are permitted to continue to stretch their withdrawals and there are also partial exceptions to the harsh new rule for minor children and persons with disabilities.

The SECURE Act of 2020 makes saving for retirement and tax and estate planning for retirees better in some respects but somewhat more complex. This is a good time to check in with trusted financial and legal advisors. In the meantime, here are some additional thoughts about how successful retirees cope with the uncertainties of retirement.

How Successful Retirees Cope with Retirement’s Uncertainties

Most successful retirees start by carefully identifying their spending goals and developing a reasonably good estimate of their non-discretionary expenses, the basic spending they cannot avoid. Non-discretionary spending means the cost of rent or mortgage and taxes, utilities, transportation costs, meals; and, other lifestyle basics we all seem to have to need, such as our phone and cable. Successful retirees also set some parameters on their discretionary spending on vacations, gifts to family and similar beyond the basics “wants.” Equally important, successful retirees periodically assess potential future expenses such as home and car maintenance and address these with specific savings; and, they address big risks such as health needs with insurance and legal strategies. Of course, successful retirees also accumulate retirement savings and match the level of savings with their level of desired combined total spending, or reduce their spending if the numbers don’t match.

Identifying spending goals and having substantial retirement savings isn’t enough, though. Even substantial savings can be damaged by market losses, especially during retirement, when retirees are withdrawing money for living expenses. Retirees and people saving for retirement must reconcile the need for their investments to grow to keep up with inevitably rising costs versus the need to avoid investment market losses. The fear of failing to successfully reconcile these two goals is made more intense by the memory of the nearly 50% stock market declines in the early 2000s and again in 2008-9.

A powerful way some successful retirees reconcile the competing needs for investment growth and avoiding market losses is by regularly revisiting their investment asset allocation. Asset allocation, the ratio of stocks to fixed income in your investments, is an important driver of growth, the engine that can add substantial gains to investment accounts when the market does well. More importantly, asset allocation is a source of protection, when non-stock investments are a sufficient source of funds to avoid the need to sell stock in down times. Although there are many factors that go into deciding the appropriate ratio of stock to fixed income, one way to conceptualize the decision is to think of fixed income (bonds, cash and other lower risk investments) allocation in the context of annual spending needs. For example, if you must withdraw $20,000 per year from your investments, keeping about $100,000 of the overall balance invested in fixed income will support annual withdrawals for 5 years without having to sell from stock if stock prices decline. Five years is as long as it took the US stock market to fully recover to its peak after the Great Recession of 2008-9.

The chart below illustrates the difference in returns between the S&P 500 (the 500 largest US companies), a 60% stock / 40% bond portfolio, and a more conservative 40% stock / 60% bond portfolio. Although the S&P 500 performs well above the more conservative portfolios in good years, it does not recover as quickly in down years. After the trough of the market in October 2008, the 40/60 portfolio recovered only one year later in October 2009, whereas the S&P 500 did not recover until March of 2012 – 3 years behind the 40/60 portfolio. The 20-year annualized return further reinforces this idea by showing us that the annualized return of the S&P 500 over the last 20 years was only 0.40% higher than a 60/40 blend, and only 0.60% higher than a 40/60 blend.

A consistent, thoughtful review of your asset allocation is imperative to preserving assets for a long, prosperous retirement. Is your portfolio positioned to protect your financial future? As always, consult trusted tax and financial professionals before making important tax and financial decisions.

Samuel Financial LLC is located at 858 Washington St. Dedham, MA 02026 and can be reached at (781) 461-6886.  Securities and advisory services offered through Commonwealth Financial Network, member FINRA/SIPC, a registered investment adviser. www.samuelfinancial.com.

Fixed insurance products and services offered through CES Insurance Agency or The Hanson Group.

Taking the Mystery Out of Gift Giving

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We are often asked about the tax rules around gift-giving, especially as the end of the year approaches.  These tax rules are governed by the federal gift and estate tax system, which is wholly separate from the income tax system.  There is no Massachusetts gift tax.

If you give a gift, the money you give is not income taxable to the recipient, nor is the gift tax-deductible by you (the person who makes the gift, who we’ll call the “donor”), unless it is made to a qualified charity.

Federal gift tax, if any, is paid by the donor, not by the recipient.  For federal gift and estate tax purposes, under current law every US citizen has a combined $11.4 million exemption (in 2019) from gift and estate tax. This means that each person can give up to $11.4 million to others, either during their lifetime or at death, without paying any federal gift or estate tax.  A gift tax is payable only after the donor has made combined lifetime and death time gifts of more than $11.4 million.

In addition, certain gifts are exempt from the gift tax.  Exempt gifts include:

  • so-called annual exclusion gifts which currently allow a person to gift $15,000 (in 2019) to any number of people in any calendar year,
  • unlimited gifts to a spouse (provided the spouse is a U.S. citizen),
  • unlimited gifts to qualified charities, and
  • unlimited payments of health care expenses or tuition for another as long as those gifts are paid directly to the educational institution or health care provider.

These exempt gifts do not require the donor to file a federal gift tax return. If a donor makes a non-exempt gift, a federal gift tax return must be filed, even if no gift tax is payable, to track how much of the donor’s gift and estate tax exemption has been used.

The gift tax is complicated, but for most people who want to make gifts to children or grandchildren, the gift tax will not be an issue. If you wish to make a non-exempt gift, it is best to consult with your estate planning attorney and accountant before making the gift so that issues such as timing, and estate, gift and capital gain tax implications can be thoughtfully considered prior to making the gift.

Medicare 101

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As part of our work at Samuel Financial LLC, we connect our clients and their families with experts in many fields, such as social security, taxes, and real estate to name a few.  This quarter, we are giving our firm’s financial column to Peter Stoner and Kathy Barniak, of Stoner & Company — experts on all matters related to Medicare.  The annual enrollment period for people who are new to Medicare or who want to make changes to their existing plans is from mid-October to early December.  Peter Stoner and Kathy Barniak have been a great resource to our firm and our clients.

Medicare 101

By Peter D. Stoner & Kathy Barniak

Medicare Open Enrollment (officially known as the Annual Election Period) begins October 15 and runs through December 7, for plan changes effective January 1.  Most baby boomers remember December 7 as a date that will live in infamy, which makes it easy to recall.  Medicare was introduced in the 1960’s and was part of Lyndon Johnson’s “Great Society”.  Back then, people over 65 had half the income of younger people, but had three times the medical expenses, so something had to be done.

There are two parts of Medicare, Part A, which covers hospital related expenses and Part B, which covers doctor related expenses.  Counterintuitively, one applies for Medicare through the Social Security Office.  You can reach them on-line at www.ssa.gov/retirement, or by calling 800-772-1213.  You can also go to your nearest Social Security Office.

Medicare Part A is used for hospital insurance and covers inpatient stays at medical facilities, as well as, home health care, rehab at nursing homes and hospice care.  Note that if you are spending the remainder of your life in a nursing home, Medicare will not cover custodial care. You will need long term care insurance for that.  Part A has a $1420 “per benefit period” deductible in 2020.  A new benefit period begins once a beneficiary is released from the hospital for 60 days or more, so this deductible can be incurred multiple times each year. Part A has a $0 premium for most people.

Medicare Part B provides medical insurance to help cover physician visits, physical therapy, durable medical equipment and other medical services, such as lab tests and screenings.  It has an annual deductible of $197 in 2020 and 20% coinsurance.  Part B has a premium which is “means tested”, so it is correlated to income.  That premium is projected to be around $145 per month in 2020, but can be as high as around $460 a month for “high wage earners”.

Once someone has Medicare Parts A & B, they have health insurance, but because of the deductibles and coinsurance most people also elect a Medicare Advantage or Medicare Supplement plan.  These are distinctly different types of plans that are confused for one another all the time.

Medicare Advantage (Part C) plans are provided through private carriers who have a contract with Medicare.  In Massachusetts these plans are primarily Health Maintenance Organizations (HMOs) or Preferred Provider Organizations (PPOs), so they all have some form of a provider network.  Generally, referrals are required to see a specialist and most services incur a copayment.  They tend to have low premiums and they offer multiple options with varying premiums, copays and out of pocket maximums.  Usually, the higher the premium, the lower the copayments and the lower the premium, the higher the copayments.  They may also include added benefits like vision and dental, not covered by Medicare, in order to differentiate themselves from other plans.  Most Medicare Advantage plans incorporate prescription (Part D) drug coverage within their product.

Medicare Supplement (Medi-Gap) plans are also provided through private carriers.  They have state mandated benefits and fill in the gaps left by Medicare.  They cover any provider who has a contract with Medicare and specialists may be seen without getting a referral.  No Supplement plan includes prescription coverage, so a separate, or “stand alone” Part D plan must be elected to provide prescription drug coverage.

Part D Prescription Drug Coverage will be provided through 25 different plans in 2020.  Which plan is most suitable depends on your prescriptions.  Premiums and copays vary substantially.  If your prescriptions change during the course of the year, you can change your drug coverage during Medicare Open Enrollment (October 15 – December 7), but in most cases, must retain your existing plan until January 1 of the following year.   There can be an added income assessment to the Part D plan premium for “high wage earners.”.

This is but a brief outline to provide the basics of Medicare.  If you are turning 65 in 2020, or are over 65 and plan to retire, the paperwork for Medicare Parts A & B should be initiated 90 days before the month during which you plan to transition to Medicare.  When your 65th birthday approaches, you will be inundated with literature that is overwhelming and confusing.  You are welcome to call us personally, go to a SHINE counselor at your local Senior Center or use www.Medicare.gov for help.

Keep Your Eye on the SECURE Act

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The SECURE (Setting Every Community Up for Retirement Enhancement) Act is a bill currently making its way through Congress. If the Act is signed into law, it will change the rules that govern Required Minimum Distributions (RMDs) made from retirement accounts after the account owner’s death.

The House of Representatives recently passed the SECURE Act with a near-unanimous bipartisan vote. The Trump administration has not taken a position on the bill.  However, if the Act passes in the Senate, lobbyists who support it say they expect the president to sign it into law.  Passage of the Act is currently being blocked in the Senate by Senator Ted Cruz who wants to add a provision to the bill allowing 529 college savings accounts to be used toward expenses for homeschooling.

Currently, non-spouse beneficiaries of inherited retirement accounts can stretch RMDs over their lifetimes.  These distributions from inherited retirement accounts are taxable, so the longer that beneficiaries can postpone or defer them, the better.

If the SECURE Act is signed into law, non-spouse beneficiaries of retirement plans will have to withdraw the balance of the retirement account within 10 years of your death. The proportion of the retirement account distributed to the beneficiary each year within this period can vary.  Exceptions have been proposed for minor and disabled children. However, once a minor child who inherits a retirement account attains the age of majority, the child would have to withdraw the balance of the account within 10 years.  The Act would also impact trusts that are named as beneficiaries of retirement accounts after the owner’s death and affect distribution of retirement assets.  If enacted, these new rules will begin applying to inherited IRAs in 2020 and non-IRA retirement plans in 2022.

Some strategies to keep in mind and learn more about if the act is passed are conversions of traditional IRAs to Roth IRAs, using retirement plans for charitable giving by way of qualified charitable contributions made directly from retirement plans and charitable remainder trusts funded with retirement plans and replacing the lost value of tax deferral with life insurance.

Stay tuned for more information about the SECURE Act and its impact as well as planning strategies that may mitigate the impact of this legislation if and when the Act is passed.

Three Tax Advantaged Ways to Use Required Minimum Distributions (RMDs)

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For those taxpayers 70½ and older and retired, the IRS requires annual withdrawals from retirement accounts. Some fortunate taxpayers don’t need to use their entire required withdrawal amount for living expenses and wonder whether there are tax advantaged ways to put this “extra” money to use. Here are three tax advantaged ways some taxpayers can use RMD amounts.

Use RMDs to Pay Estimated Income Taxes

The IRS and most states consider income taxes due when income is received. For taxpayers who are employed, taxes are usually withheld from each paycheck and sent to the IRS. Other income, such as interest, dividends, capital gains, pensions and social security may be taxable and income tax withholding is not required. Taxes are still due, so, instead, taxpayers are required to make quarterly estimated tax payments.

Quarterly estimated tax payments are due in April, June, September and by January 15 (for the prior calendar year). Payment is considered made when payment is sent to the IRS. Making estimated payments on time can present challenges because of the extra calculations, paperwork, cash flow or just simply remembering to make payments on time. Late payments of estimated taxes may result in tax penalties.

For taxpayers who don’t need all of their RMD amount for living expenses, using some of the RMD to pay estimated taxes has a tax advantage. When RMD money is used to pay estimated taxes, the IRS has a special rule favorable to taxpayers. Instead of considering the payment made when the money is sent to the IRS, the payment may be made at the end of the year but is treated by the IRS as being paid evenly during the year at the required times. Why does the IRS allow this favorable tax treatment? Perhaps to encourage investors whose cash flow and spending doesn’t always perfectly match the quarterly payment dates.

Use RMDs for Gifts to Charities

RMDs are taxable income and the amount can shift a taxpayer into a higher tax bracket. For taxpayers subject to RMDs, the IRS permits any part of the RMD to be satisfied without increasing taxable income if the amount is sent directly from the IRA to an IRS recognized charity. The RMD cannot exceed $100,000 for this purpose and must come from an IRA not a 401(k) or other retirement account.

Use RMDs to Pay Long Term Care Costs

Paying for long term care costs creates enormous challenges. For families able to pay for care at home or in assisted living residences, one of the challenges is deciding which accounts to use first. Using RMDs can provide important tax advantages that make family money last longer. Long term care costs are income tax deductible for taxpayers who itemize, if the costs:

  1. cover care for a person who is chronically ill, meaning the person cannot perform at least two activities of daily life without help (i.e., eating, bathing, dressing, toileting, continence, and transferring from bed or chair to daily activities);
  2. are medically necessary for services from a diagnosis, rehabilitation, therapy, cure, treatment, maintenance or personal care, often evidenced by a treatment plan prescribed by a physician;
  3. include residence and meals at an assisted living facility if part of a medically necessary treatment plan;
  4. are more than 10% of the taxpayer’s adjusted gross income (Congress is considering reducing the current 10% threshold to 7.5% as it has been in the past); or,
  5. are for long term care insurance premium but with age based limits (for 2019, over age 71 is $5,270; 61-70 is $4,200 and 51-60 is $1,580 per year), with self-employed taxpayers being able to deduct more, without itemizing.

As always, consult trusted tax and financial professionals before making important tax and financial decisions.

Samuel Financial LLC is located at 858 Washington St. Dedham, MA 02026 and can be reached at (781) 461-6886.  Securities and advisory services offered through Commonwealth Financial Network, member FINRA/SIPC, a registered investment adviser. www.samuelfinancial.com.

Fixed insurance products and services offered through CES Insurance Agency or The Hanson Group.

Health Care Decision-Making in a Crisis

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I recently had the opportunity to read an article in a professional journal on health-care decision-making during a crisis when nothing is in writing.  It discussed a study that interviewed physicians and other health care providers caring for people who had not named a health-care decision maker and did not have the capacity to make their own health care decisions.  In some states (but not in Massachusetts), state law will dictate who becomes a surrogate decision-maker when the incapacitated person has failed to do so. In most cases that person is the spouse or next of kin.  However, that surrogate may have no idea what the ill person’s wishes are or that surrogate may be the last person the patient would have chosen (think estranged spouse or child).  In other circumstances, family members may disagree on care options.  The most difficult situations are patients without immediate family to make health care decisions for them who had not designated someone else to do so.  In many cases, it was unclear whether the decisions being made were reflective of the patient’s wishes. The article underscored the importance of doing the following:
  • Sign a Health Care Proxy that names the person you want to make health care decisions for you if you are unable to do so and at least one back-up decision-maker.  Ideally, this is someone who you see and speak with often, and with whom you have had an opportunity to discuss your wishes on more than one occasion.
  • Make sure the contact information for your Health Care Agents is correct in your Proxy, and keep it up-to-date.
  • Give your Health Care Agents and your physician a copy of your Health Care Proxy.
  • Keep a copy of your Health Care Proxy on your smart phone so that it is easily accessible in a crisis and ask your Health Care Agent to do the same.
  • Communicate your care preferences to your Health Care Agents, either in conversation or in writing.
On the last point, there are many useful tools that can be found online to assist in this conversation.  I have listed a couple here:

Retirement Account Caution: Change in Firm or Provider Requires Confirmation of Beneficiaries

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Here is something to be aware of if you have IRA, 401(k), 403(b) or other retirement account.  At Samuel, Sayward & Baler  we are careful to advise you about how to designate the beneficiaries of your retirement accounts consistent with your estate plan.  In some cases, customized beneficiary designations are required to ensure these accounts are distributed properly to achieve your planning goals.

There are two circumstances in which these beneficiary designations can be disrupted and over which you have no control:

  • If your financial advisor changes firms. Although your accounts may move with your advisor to the new firm (if you so choose), your beneficiary designations may not necessarily move along with your retirement accounts.  If your financial advisor has changed firms, be sure to confirm with your advisor that beneficiaries have been correctly designated on your new retirement accounts established at the advisor’s new firm.
  • If your employer or former employer changes its 401k or 403b provider. Beneficiary designations on employees’ or former employees’ accounts typically do not move over to the new provider, and beneficiaries must be re-designated. This is another circumstance where action is needed to ensure that beneficiary designations are correct.

If the owner of a retirement account passes away with no beneficiary designated on that account, the account is payable to the account owner’s estate. Although the funds in the account may still be distributed consistent with the owner’s estate plan (assuming the account did not have a beneficiary designation different from the rest of the owner’s estate plan), there will be no opportunity for continued tax deferral or a so-called “stretch” payout of the retirement account over the life expectancy of the beneficiary.  The account instead must be distributed in a lump sum to the owner’s estate, or at best over a 5-year period, and the income tax payable on the account must be paid all at once.  This is a very bad result from a tax planning perspective.

If one of these situations occurs, do not delay in ensuring that your beneficiary designations are in place and are consistent with our recommendations and your estate plan.  In all cases, we recommend that you request written confirmation of beneficiary designations so that you can confirm that beneficiaries are designated correctly.  If you would like us to review your designations we are happy to do so.

Wills • Trusts • Elder Law • Long-Term Care Planning • Estates

©2024 Samuel, Sayward & Baler LLP. All Rights Reserved. The information presented on this website should not be construed to provide legal advice, nor does it constitute the formation of an attorney/client relationship. Read the disclaimer.