Elder law estate planning

How the New Rules Under the Secure Act Changes the Way People Will Inherit Money

Published on: May 12, 2020 | by Ettinger Law Firm

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

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

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

Save for Retirement and Pay-Off Your Student Loans

Published on: May 8, 2020 | by Ettinger Law Firm

The average student loan payment, according to credit.com, is $393 a month. That represents almost 20% of the monthly household income after taxes. During your prime working years, you may be tempted to postpone saving for retirement or maxing out your 401K contribution. If you’re on a federal income-based repayment plan, however, saving for retirement while paying off your student loans may actually reduce your monthly student loan payment.

Most federal repayment plans calculate your monthly payment based on your adjusted gross income (your net pay after deductions for taxes). The lower your net income take-home pay, the lower your monthly student loan payment may be. Not all federal repayment plans will result in a lower monthly payment. The eligible repayment plans include:

Revised Pay as You Earn Repayment Plan (REPAYE)

How Much Do You Think You Need for Retirement?

Published on: May 5, 2020 | by Ettinger Law Firm

In 2019, the U.S. Census Bureau, determined that the average national retirement age was between 63 and 64 for men and 62 for women. Most Americans agree that in retirement they’ll need saving to supplement Social Security benefits. Social Security alone will not get them through retirement. The current life expectancy for Americans is 78.93.

Social Security benefits accounts for close to 40% of your pre-retirement income. The average Social Security monthly benefit in 2018 was $1,409.91 a month, or about $16,919 a year. You will need savings to cover the other 60% through a combination of cash, 401k, and other retirement accounts for income. Schwab conducted a survey of its 401k plan participants and found that the participants themselves calculated they’ll need savings of $1.7 million on average to get through retirement.

To figure out how much money you’ll need to support yourself in retirement consider the following:

About 40 Million Americans to Experience a Drop to their FICO Score

Published on: May 2, 2020 | by Ettinger Law Firm

Millions of Americans are expected to experience a drop in their FICO score when the Fair Isaac Corporation, the company that invented the FICO score, modifies the methodology they use to determine a consumer’s FICO score. Beginning in the summer of 2020, lenders may opt to use the new methodology when assessing the creditworthiness of a consumer when extending credit and setting interest rates on mortgages and consumer loans, such as credit card or automobile loans.

Link between consumer behavior and your FICO score

Consumers with fair credit, growing debt, who take out personal loans to consolidate debt, or who are about to max out their credit cards are expected to see a negative impact to their FICO credit score. The Fair Isaac Corporation updates its scoring model every few years. The last time significant changes were implemented was in 2014, where it was thought that credit restrictions were lessoned. For individuals with little to no credit, utility payment histories, rental payment histories, and the elimination of civil judgments from individual’s credit histories, helped bolster their credit score.

Why Claiming Social Security Benefits at 62 May be Good for You

Published on: April 24, 2020 | by Ettinger Law Firm

The conventional wisdom is to wait and not claim Social Security benefits until you are over 66 (the full retirement age for individuals born between 1943 and 1954). Full retirement age is calculated by year of birth. To see what your full retirement age is click here, or review the website maintained by the Social Security Administration (www.ssa.gov). The reason choosing when to begin claiming Social Security benefits is a big decision that will impact the size of your monthly benefit amount or checks for the rest of your life. For example, if you have a full retirement age of 67 and wait until age 70 to begin claiming Social Security benefits, you’ll receive your full benefit amount plus an extra 24% each month for the rest of your life.

Delaying benefits however isn’t right for everyone, and it may make sense for you to claim your benefits as early as possible, or age 62, (the earliest retirement age for individuals born between 1943 and 1954). Again, to determine when you can claim your benefits, click here. Three reasons why claiming your retirement benefits through the Social Security program may be right for you are as follows:

Your retirement years are limited.

How much can you receive in divorce benefits?

Published on: April 15, 2020 | by Ettinger Law Firm

If you’re eligible for divorce benefits from the Social Security Administration (SSA), you can collect up to 50% of the amount your former spouse is eligible to receive by claiming your benefits at his or her full retirement age (FRA).

Your FRA is either 66, 66 plus a few months, or 67, depending on the year you were born. The earliest you can claim Social Security benefits is 62. If you claim benefits before your FRA, your Social Security benefits will be permanently reduced by as much as 30%. You can only receive your full Social Security benefit amount if you claim benefits at your FRA.

You cannot double dip

Should I Get Long-Term Care Insurance?

Published on: March 20, 2020 | by Ettinger Law Firm

Did you know that the cost of in-home care services and nursing home care are not covered items under the Medicare program? According to AARP, the average cost of nursing home stays is more than $100,00 per year in many parts of the United States. A comprehensive retirement plan should include long-term care insurance because costs like these can drain your retirement savings quickly.

What is long-term care insurance?

Long-term care insurance (LTC) helps individuals and couples protect against medical expenses not covered under the Medicare program. Once you or your spouse can no longer perform daily living activities such as bathing, dressing, and eating on your own, LTC insurance typically quicks in to cover in-home care services. There is a waiting period (called “elimination period”) of sorts that applies to most plans before coverage begins in earnest. Check your insurance policy documents for more information.

Pay Up: 13 States that Tax Social Security Benefits

Published on: March 16, 2020 | by Ettinger Law Firm

For over 80 years, Social Security has made guaranteed monthly payouts to eligible retired workers. Today, over 64 million people receive a monthly benefit from the Social Security program. The average retired worker benefit is $1,505.50 a month, as of January 2020. Generally Social Security income for the ordinary retiree is not taxed. There are states however, that do tax Social Security income.

The federal government can tax your Social Security benefits

The taxation of Social Security benefits began in earnest as part of the Social Security Amendments of 1983. Beginning in 1984, the Internal Revenue Service (IRS) is allowed to apply federal ordinary income tax rates on up to one-half of an individual’s or couple’s Social Security benefit, depending on their income. If an individual’s or couple’s modified adjusted gross income (MAGI) plus one-half of benefits exceeds $25,000 or $32,000, respectively, they would be subject to this tax.

Back to Basics: Estate Planning 101, Part IV

Published on: March 12, 2020 | by Ettinger Law Firm

Every estate plan should include a living trust. A living trust is different from a trust and should be part of your estate plan along with a last will and testament and power of attorney (financial and medical) documents.

Why a living trust is an important estate plan document

A living trust is a written legal document that partially substitutes for a will. With a living trust, your assets (your home, bank accounts and stocks, for example) are put into the trust, administered for your benefit during your lifetime, and then transferred to your beneficiaries when you die. Living trusts, have great value as part of estate planning, but not necessarily to avoid probate. A living trust, if properly prepared and administered, can be a very effective tool to manage assets in the event of illness, disability or the effects of aging. In light of the aging population, the use of living trusts to minimize the risk of elder financial abuse and address similar issues, should be an important consideration in an estate plan.

Back to Basics: Estate Planning 101, Part III

Published on: March 8, 2020 | by Ettinger Law Firm

A power of attorney, including a heath care power of attorney, are crucial estate planning documents. This is especially important if you have Alzheimer’s disease, dementia, or are suffering from another chronic and debilitating illness. Individuals who are widowed or alone should carefully consider who they can trust to manage their financial and medical affairs when they lose the ability to make such decisions themselves.

Power of Attorney: A power of attorney is a legal document you can use to appoint someone to make decisions on your behalf. The person you designate is called an “attorney-in-fact.” The appointment can be effective immediately or can become effective only if you are unable to make decisions on your own.

o New York State has a short-form and a long-form Power of Attorney form.