I know it’s a couple of day early, but I just wanted to wish all my loyal readers a Merry Christmas and Happy Holidays! In a year that has seemed like a decade and where we’ve had to redefine the way we live, work, and interact with others, I hope you and your family are able to at least enjoy some time together this holiday season. I also wish you, and those most important to you, health and happiness this Christmas and into the New Year. I’ll be back next week with a end of the year post, but for now…Merry Christmas and Happy Holidays!
If you have an aging parent or relative, you may eventually find yourself in a caretaker role. It may start out as helping out here and there around the house to eventually shuttling them to doctors appointments and doing the grocery shopping. It may even evolve into constant care to the point of that parent or relative moving in with you for around-the-clock care. Caregiving is a natural part of life and many people find it bookends their lives. After all, parents provide care for babies and children and they grow into adults. Eventually those adults age themselves and require that others help and care for them as they reach their senior years, most notably towards the end of life. Despite the universality of it, caregiving and who will be the caregiver is rarely discussed among families. This can lead to some serious tension when it comes to family dynamics and it is not uncommon for familial issues to arise between those in the role of caregiver with family members who do not share such responsibilities. Thus, it’s important that you first be cognizant of situations in which you may find yourself falling into that caregiver role with an older relative or parent. Do you find that you are doing more chores around the house to help them? Are you their main source of transportation? Are they unable to do normal activities without you there to help them (i.e. getting up out of a chair, cooking food, etc.)? If so, you may want to talk with other family members about this and try to possibly get them involved as well so as to share the responsibility. Having such discussions can prevent a lot of tension and discord in the future as well as prevent one family member from being overly burdened with having to be the main caregiver. There is a lot of information out there for people who are serving as caregivers as well as resources to help them manage expectations and know what to expect in the role and to provide emotional support.
With tomorrow being Thanksgiving, now is a good time to reflect on what you are thankful for in your life. Is it your family? Your health? Your career? A combination of all those things? Furthermore, with the year quickly winding down, now is a good time to being thinking about the past year and how things have changes, as well as to start thinking about what your goals are for 2020. This shouldn’t be a sudden process, but a gradual one in which you take your time and really think about things. So, for the time being, enjoy your time with friends and family tomorrow and savor the turkey and all the yummy sides that go along with it. Happy Thanksgiving!
The traditional notion of what a family is has shifted over the decades as society has become more open and excepting of families that do not fit the norm. Now, for the purposes of this blog post, a “traditional” family is that of a husband and wife and one or more biological children. Whether you agree with it or not, things such as divorce and same-sex marriages are more prevalent in today’s society and–possibly coinciding with that–so too is the blended family, which is formed by two previously divorced people getting married. While these types of families are becoming accepted as more and more common, they can present some interesting estate planning situations. Such questions may include how step-children raised by a non-biological spouse, but not officially adopted, should be treated? Does the state in which you live have a specific definition of a “beneficiary” that may impact who you want to pass your estate to? What are the possibilities of laws changing between the creation of your estate plan and its actual execution. These are just a few of the important questions of consider if you find yourself in a non-traditional family. Furthermore, depending on the state you live in, these questions could potentially have some complex answers that may require very specific knowledge of the law. Therefore, when you start your estate planning journey, you should should speak with an attorney that specializes in estate planning and knows the intricacies of the law. It may take some time and work to find that attorney, but a good estate planning attorney is worth it as they are best positioned to ensure that your wants and desires are met when it comes to your possessions and assets once you pass on. When was the last time you spoke with an estate planning attorney?
Finances can be a taboo topic for many Americans. Such conversations can lead to anxiety and fear about potential outcomes or whether you are doing things correctly. However, these feelings should not prevent you from having important discussions with friends and family members about your future financial plans. These conversations can be valuable and can avoid a lot of confusion. For example, if you have children or grandchildren that you plan on leaving money to, you may want to discuss that with them so that they can start thinking about what they want to do with that money. Or, if you have certain funds that you want used in certain situations as you get older, you may want to talk to family and friends who may have to make decisions regarding that money if you eventually find yourself incapable of doing so. Yes, those conversations may be difficult, but they are worth having and can help to avoid potential drama and issues in the future. You also don’t have to be the one retiring to have these conversations. If you have parents that are retired, but haven’t talked to you about their future financial plans, you may want to broach the topic yourself. Having such a conversation can provide a relief for both you and your parents once it occurs. It can allow you to formulate better plans for your own money as well as give you a sense as to your parents finances and how they want that money used or spent. So, are you ready to have the money talk?
It’s not uncommon to find young adults in their 20s (or even 30s) living at home or relying on their parents for financial support. Younger generations have struggled in recent years finding their footing in the real world thanks to tough economic conditions and soaring student loan debt. As a result of this, many parents have continued to support their young adult children through various means, whether it be paying phone bills, credit card bills, or helping out with rent. No parent wants to see their children struggle, but as you move towards retirement, you need to be aware of just how much support you are offering and–most importantly–whether you can afford to continue to offer such support. If you find that financially supporting your children past the age of 18 is starting to impact your financial and retirement plans, you may want to consider whether continuing to support your child is a good idea. This doesn’t mean you have to kick your kid to the curb, but it does mean you may need to think about or change just how much support you offer and whether it’s beneficial. Such thinking may seem selfish, but I assure you it is not. You still need to think about yourself and your financial well-being. It may also force your adult children to become more independent and better prepared to live on their own. No, you don’t have to completely cut your children off, but cutting back is perfectly acceptable. If done so thoughtfully, it can be a valuable lesson for your children and allow them to become strong, independent adults.
If you have a lot of money saved up in an IRA, you may find yourself thinking about tapping into it before you need it. Maybe you had an emergency that requires some extra funds or your want to splurge a bit as you get near retirement. Whatever you decide to do with your money, just make sure it’s not prohibited by the rules governing IRAs. Prohibited transactions include those in which account owners act in a self-serving manner or in which the account owner uses the money to enrich himself/herself or other “disqualified person.” A disqualified person includes the accounts owner, the account owner’s spouse, any lineal descendants of the account owner, or people who help in the custodial care and maintenance of the account. In other words, the money in an IRA account should only be used to enrich the account itself and not people associated with it. So, if you want to clean out your IRA, go to Las Vegas, and go all-in on one poker hand with the hopes of doubling your earnings–which you would then put back into the account within the 60-day rollover window–then go right ahead. You won’t get in trouble for that. However, if you decide to invest $5,000 of your IRA in your child’s new business, then you’re really in for some trouble! It can be a fine line and what may seem like a harmless investment could open up a world of hurt for you and your finances. Prohibited transactions are not punished lightly as the tax-deferred status for the entire IRA is lost and the IRA is considered to be fully paid out. Furthermore, the entire balance of the IRA could be subject to tax and an early distribution penalty. That can be a heavy sentence, especially if you have a lot of money saved up. If you are unsure as to whether an IRA transaction you are considering is prohibited, you should speak with a certified financial planner or retirement specialist. If you are nervous about such a transaction, you’re better off erring on the side of caution and avoiding it altogether.
When major life changes happen, you should take the time to make sure the beneficiary forms are updated on your insurance policies, retirement funds, and any other accounts you intend to have passed on to others. Not updating these forms can lead to infighting among relatives and create long-lasting rifts in relationships between those you hold dear. Outdated beneficiary forms can also potentially leave your money open to ending up in the wrong hands–such as an ex-spouse or a family member you had a falling out with. In fact, there are many stories out there about ex-spouses making claims on insurance policies and taking those claims to court because of outdated beneficiary forms. Furthermore, it’s important that you understand how state laws where you live may affect beneficiary forms. For example, some states, such as Texas, have a revocation-on-divorce statute that automatically revokes an ex-spouse’s beneficiary designation upon divorce. This can cause problems if you intend to keep an ex-spouse as a beneficiary (we won’t get into reasons why you’d want to do that here). The work around to that is to just file a new beneficiary form after the divorce with your ex-spouse on it. However, many people forget to make such an update. Another common story with outdated beneficiary forms is that people don’t update the forms but update their will thinking that it will override such forms. Guess what, that doesn’t work and the information in a will that directs who should get your accounts is useless against a beneficiary form. So take this post as a reminder to update your beneficiary forms. If you haven’t had a major life event, you don’t have to wait, you can always review your beneficiary information and most updates are done by simply filling out a one-page form.
I’ve mentioned the importance of estate planning here on this blog at times in the past as something that you should include as part of your retirement planning. After all, it will most likely be your remaining retirement funds that are left over after you pass which will need to be divided up. Also, it’s one less thing you will have to worry about once a plan has been put in place (barring any life changes that is). Traditionally, people often think of estate planning as something done later in life, especially once it is clear what your assets are and what you want to do with them. However, estate planning should be something that is done much sooner, especially once you begin a family. This can be very wise if you have young children and have people that you want to care for them should–heaven forbid–you and your significant other both become incapacitated at the same time. This language should set forth who you want your children to live with and any possible custody arrangements. This also ensures that your children will be allowed to stay with people (most likely family or friends) whom you feel are best able to care for them and will help the children cope during that difficult time. I understand that this may not be easy to think about, but it can make a huge difference for both the well-being of your children as well as for your own comfort. If you already have a will and want to add this language, you should speak with an estate attorney who should be able to answer any questions you may have and inform you of any jurisdictional rules regarding such language.
Aging solo is not an uncommon occurrence anymore, thanks in large part to the Baby Boomer generation and the way they have redefined priorities regarding settling down and having families. Furthermore, you may find yourself in a situation in which you are aging without a significant other by choice or by life’s unpredictability (i.e. being a widow/widower). While there is nothing wrong with a desire to lead an independent and single-minded life in retirement, you do need to think about the support system you may need as you grow older. You will also want to have instructions in place for those people who will comprise your support system so that they know what to do and how best to help you. For example, if you do not have any children of your own, but are close with your nieces and nephews, you may want to talk with them about naming them as a health care proxy should you ever reach a point where you cannot make decisions regarding your own health care. You will also need to be cognizant of your finances and whether you have enough saved since you won’t have another source of income or a significant other’s retirement savings to rely on. Other decisions associated with aging may also require more thought, such as who you want to serve as the executor of your will and who have named as beneficiaries on any retirement or insurance accounts you have. Remember, just because you are aging solo doesn’t mean you have to do so completely alone and keeping in touch with friends and family can make the experience all the more enjoyable and safe. If you are certain that you will be aging solo, you may want to speak with a certified financial planner to make sure that your finances are in order as well as with an estate planning lawyer (or one specializing in elder law) to make sure your other affairs are in order.