DOJ Rolls Out Elder Justice Website

Wills, Trusts & Estates Prof Blog post by Gerry W. Beyer

DOJ The United States Department of Justice has launched the Elder Justice Website, as part of the Elder Justice Initiative designed to provide a coordinated federal response by emphasizing various public health and social service approaches to the prevention, detection, and treatment of elder abuse. 


The Elder Justice Act represents Congress’s first attempt at comprehensive legislation to address abuse, neglect, and exploitation of the elderly at the federal level.

On the Elder Justice Website, individuals will find information about how to go about reporting elder abuse and financial exploitation.  The website is intended to serve as a “dynamic resource” and will be updated to reflect any changes in the law and current news in the elder justice field.


Why you will need less money than you think for retirement

Conventional wisdom says you need retirement income equal to 80% of your final salary. But there is a decent chance you could happily retire with far less.

Let’s start with reality: Most of us don’t have a well-honed financial plan in which we set out to amass a specific sum and quit the workforce only when we hit our target. Instead, we save what we can and then make do.

If that means retiring with less than 80%, I wouldn’t be overly concerned. Consider a 2014 survey of recent retirees by Baltimore’s T. Rowe Price Group.

The 1,507 participants, who had a median net worth of $473,000, were living on an average of 66% of their preretirement income. Yet 57% said they were living as well or better than when they were working, and 85% agreed with this statement: “I don’t need to spend as much as I did before I retired to be satisfied.”

The 80% replacement ratio assumes you can get by on less than your final salary because you no longer are saving 10% a year or so toward retirement. You also are no longer making an employee’s 7.65% payroll-tax contribution to Social Security and Medicare.

In addition, your federal income-tax bill should go down. Those 65 and older can claim a higher standard deduction or, if they are itemizing, can often deduct unreimbursed medical and dental expenses in excess of 7.5% of income, versus 10% for those who are younger. On top of that, a significant portion of your income will likely come from Social Security benefits, which are partially or entirely tax-free.

Set against these savings is one cost that could rise sharply: health-care expenses. This is a wild card, in part because much depends on whether you end up in a nursing home.

All this seems reasonable as far as it goes—but I don’t believe it goes far enough. While some retirees might need 80% of their preretirement income, here are three reasons you may be comfortable with much less.

Your children are off the family payroll.

According to the Agriculture Department, it costs $245,000 for a middle-income family to raise a child through age 17. College might add another $100,000 or $200,000, and possibly more, depending on whether your teenager goes to a state or private school. Often, the tab doesn’t end there, as parents subsidize their adult children’s initial years in the workforce.

What happens when those bills are over? Some experts think the parents’ cost of living falls sharply, which means they don’t need nearly so much retirement income. Anthony Webb, a senior research economist at Boston College’s Center for Retirement Research, disagrees.

“I don’t think it equates to what people do in the real world,” he argues. “When the kids leave home, instead of consuming less and saving more, the parents spend more. They likely travel more and go to nicer restaurants.”

It is a shame empty-nesters aren’t seizing the opportunity to save more. But there also is cause for optimism: If the money is getting lavished on travel and eating out, it suggests the parents have a fair amount of financial wiggle room—and they could easily cut expenses if they later find themselves without enough retirement income.

You were saving more than 10%.

In 2014, Americans saved just 4.8% of their disposable personal income, according to the Bureau of Economic Analysis. But while many Americans save pitifully little, I meet plenty of folks who regularly sock away 20% of their income, and even more once they count any matching employer contribution to their 401(k) plan.

That brings us to one of the great financial ironies: The more you save, the less you need for retirement. If you sock away just 10% of your income, you might indeed require 80% of your final salary to retire in comfort. But if you save 25%, you could sustain your current lifestyle with perhaps 65%.

Your mortgage is paid off.

More people are carrying mortgage debt into retirement. The Federal Reserve’s 2013 Survey of Consumer Finances found that 42% of households headed by someone age 65 to 74 have debt that is secured by their home, up from 32% in 2004.

Many seniors, however, seem to get this debt paid off in their initial retirement years. Among households headed by someone age 75 and older, less than 20% have loans secured by their house.

“If you have your mortgage paid off, it might take down the income you need by 10% or 15%,” says Denver financial adviser Charles Farrell, author of “Your Money Ratios.” “If you have low fixed costs, you could probably retire with a lot less than 80%. You might be comfortable at 50% or 60%.”

Jonathan Clements is the author of the “Jonathan Clements Money Guide 2015.” Email:


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The Executor’s $1.2 Million Mistake

Forbes article by Ashlea Ebeling

Here’s a tale of caution about being an executor, the person you appoint in a will to oversee your estate after your death.

The cast includes a 73-year-old high-school-educated homemaker named executor of a nonagenarian cousin’s will, an attorney who was battling brain cancer, seven distant relatives and three charities all due a piece of a $12.5 million estate, and an Internal Revenue Service bill for $1.2 million in penalties and interest for failure to file an estate tax return and pay taxes on time levied on the estate.

In an appeal to the U.S. Court of Appeals for the Sixth Circuit filed in February, the executor is trying to recover the $1.2 million. The question at hand: was her failure to file the return and pay the tax on time due to reasonable cause and not willful neglect?

The details might make you think twice about who you appoint as executor of your will—or whether you agree to take on the role for a friend or relative. “What’s the lesson? Even if you have an expert, you have to pay attention to the matters at hand,” says Jon Hoffheimer, a lawyer who the court appointed to administer the estate as a co-fiduciary with the executor, Janice Specht, after it became clear that she wasn’t up to the task. (He’s a co-appellant.)

In practice, most people appoint family members or friends as executor, and they hire an estate lawyer to do the work, such as making prompt tax and probate filings. But it’s the executor who bears the ultimate responsibility to make sure it’s done—on time.

The deceased, Virginia Escher, a 92-year-old widow of a UPS worker, lived a simple middle class lifestyle in Cincinnati, Ohio despite having a small fortune, the bulk of which was in UPS stock. “They were hardworking people; they never spent a nickel,” says Vincent Salinas, a lawyer who represented the estate.

Escher appointed her cousin, Specht, as executor, six months before her death in a simple three-page will drawn up by an estate lawyer, Mary Backsman. When Escher died, Specht returned to Backsman, who indicated that she would take care of everything. Specht, then 73, had never served as an executor (even when her husband died), held no stock and had never been in an attorney’s office.

Backsman, a lawyer with 50 years of experience, was privately struggling with brain cancer and failed to follow through on the work. Meanwhile, Specht got probate notices that deadlines were being missed, even a warning call from another family about Backsman. When Specht questioned Backsman, Backsman assured Specht that she had filed for an extension. (The deadline to file an estate tax return and pay tax is nine months after death; extensions are granted routinely.)

A year after the return and tax were due, Specht fired Backsman and hired Salinas who got the estate work done in a couple of months. But that was just a piece of the saga. A push by distant relatives to remove Specht as executor led to the appointment of Hoffheimer as co-fiduciary. Another fight was over how to allocate the tax liability. And the estate filed a malpractice action against Backsman and Specht that was settled out of court. That settlement allowed Specht to pursue a refund of the penalties and interest imposed by the IRS in U.S. District Court.

The District Court judge ruled against Specht, seemingly reluctantly, noting that “the factual circumstances are both complex and sad,” and stating that reliance on counsel cannot constitute reasonable cause for the late filing and payment of taxes. Interestingly, he noted that the state of Ohio—which imposes its own state estate tax—refunded the late filing and payment penalties for Ohio estate taxes without the estate filing a refund suit. (Ohio is one of 19 states and the District of Columbia that impose a state level death tax.)

Specht and her lawyers aren’t commenting because of the pending appeal. However, their position is clear from their opposition to the motion to dismiss the case at the district court level. The U.S. Supreme Court, in U.S. v. Boyle, drew a bright line rule for tax refunds, placing the burden of compliance on individual fiduciaries (executors and trustees), and a hostile body of tax refund case law followed. But “Boyle has never been applied to a set of facts as extreme or unique as these, and should not be,” Specht’s lawyers argue. “Mrs. Specht’s complete (and completely understandable) trust and total unfamiliarity with the process, when combined with Ms. Backsman’s concealment and misfeasance, caused the late filing and payment of estate taxes.”

So what if you’re an executor? The will spells out your basic duties. Read it. In addition, Salinas says it’s his practice to prepare a list of duties—including tax filings and due dates—and have the executor sign it, acknowledging the responsibilities.



Congressman Introduces The Death Tax Repeal Act

Congressman Mac Thornberry filed his first bill of the 114th Congress on its opening day. The Death Tax Repeal Act (H.R. 173)” will completely and permanently repeal the Federal estate, gift, and generation-skipping taxes. The bill already has garnered 36 cosponsors.

“The death tax is fundamentally unfair for estates of any size,” said Thornberry. Americans are required to pay taxes on their savings and incomes while they are alive.  They should not have to do so at death as well, nor should their children and grandchildren have to bear these taxes.”

The death tax, also known as an inheritance tax or estate tax, goes against some of the values Americans cherish most. The American people should be able to work hard, build, and save knowing that these assets will one day be passed on to their children and grandchildren.  Particularly vulnerable to the death tax are small business owners, farmers, and ranchers who hope to pass personal business on to future generations but have to contend with a tax that may make that impossible.

“Generations of ranching families have worked tirelessly and sacrificed to build successful operations that help feed the nation,” said Joe Parker Jr., a local, third generation rancher and past Texas and Southwestern Cattle Raisers Association President. “Unfortunately, when it comes time to pass these hard-earned operations on to the next generation, if a rancher can’t afford to pay this tax, they lose their property and their way of life.

“Death should never be a taxable event. This is why I support Congressman Mac Thornberry’s “Death Tax Repeal Act,” which is critical to the future of the ranching industry,” Parker concluded.


52 Percent of Americans May Not Be Able to Maintain Living Standards in Retirement

Newsmax Finance article by Dan Weil

More than half the country’s pre-retirement households — 52 percent to be exact — are at risk of being unable to maintain their current living standards when they retire, according the Center for Retirement Research at Boston College.

That estimate is for 2013, based on the most recent data from the Federal Reserve. The risk index was little changed from 53 percent in the last survey three years ago, but well above the 31 percent level for 1983.

“Our expectation was that the index would improve sharply in 2013,” Alicia Munnell, the Center’s director, writes on MarketWatch.

“It certainly felt like a better year than 2010. The stock market was up, and housing values were beginning to recover. But the ratio of wealth to income had not bounced back from the financial crisis.”

Bottom line: “many Americans need to save more and/or work longer,” Munnell says.

Meanwhile, if you’re planning on retiring next year, Emily Brandon, senior retirement editor at U.S. News & World Report, offers several tips.

Decide when to begin taking Social Security benefits. In general, the longer you wait, the greater your payouts are.

Make sure to sign up for Medicare as soon as you’re eligible. “You should start submitting the paperwork for Medicare up to three months before age 65,” Christopher Rhim, a certified financial planner for Green View Advisors in Norwich, Vt., tells Brandon. “There are some financial penalties if you sign up later.”

Consider rolling over your 401k into your IRA. Doing so may save you on fees and give you more investment choices.

Pay attention to required minimum distributions for IRAs after age 70 1/2.



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Business Funding Plan – Client Testimonial

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