Retirement & Elder Law

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Griffin Foster
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Retirement & Elder Law Samantha K. Wolfe, Esquire LL.M.

Street, Suite 301 Waynesboro, PA 17268 (717) 655-7096

com Eric Ladley, Esquire Montco Elder Law, LP 608 W.

Lansdale, PA 19446 (215) 283-4444 eladley@ferrinolaw.

1 Retirement & Elder Law Samantha K. Wolfe, Esquire LL.M. in Taxation Maxwell Sipe Law Offices, LLC 20 East Sixth Street, Suite 301 Waynesboro, PA (717) Eric Ladley, Esquire Montco Elder Law, LP 608 W. Main St. Lansdale, PA (215) Zach & Laney Siler Dean -Financial Advisor -Twice divorced Taylor -Washed up soap actress -Engaged to guy parents don t like -Lives in her parents rental property 1

Foundation Financial Power of Attorney Most important estate planning document Ability to designate beneficiaries for life insurance,

2 Assets: Primary Residence (JT) $300,000 Rental Real Estate (JT) $175,000 Bank Accounts (JT) $15,000 Investment Account (JT) $250,000 Life Insurance (H) $150,000 Life Insurance (W) $50,000 Retirement (H) $450,000 Retirement (W) $110,000 Total = $1,500,000 Start with Legal Foundation Financial Power of Attorney Most important estate planning document Ability to designate beneficiaries for life insurance, annuities & retirement accounts Allow Agent to sign documentation needed for financial institutions Liquidate, convert, contribute, receive distributions 2

3 Retirement Beneficiary Designations Does not pass by Will Designate individual or trust Do NOT designate the Estate Review designations annually Consider Darth Vaders? Darth Vader? 4 D s Divorce Debt Disability Death Retirement Beneficiary Designations Primary Beneficiary Contingent Beneficiary Tertiary Beneficiary 3

Understanding Stretch-Out Goal is to stretch the income tax ramifications over the life expectancy of beneficiary Anytime you name a trust as a beneficiary of a retirement account, you must be

4 Understanding Stretch-Out Goal is to stretch the income tax ramifications over the life expectancy of beneficiary Anytime you name a trust as a beneficiary of a retirement account, you must be concerned about stretch-out Understanding Stretch-Out Example: If a trust is named as the beneficiary, the life expectancy of the oldest trust beneficiary will be used to calculate the stretchout. Understanding Stretch-Out In a trust, you can list percentages that each beneficiary will receive to get the most advantageous stretchout. 4

Conduit v. Accumulation Trusts Conduit v.

distribution (RMD) is paid out to the beneficiaries

Only look at the life expectancy of the primary

5 Conduit v. Accumulation Trusts Conduit v. Accumulation Trusts Conduit Trusts The required minimum distribution (RMD) is paid out to the beneficiaries each year. Only look at the life expectancy of the primary beneficiary of the trust. Conduit v. Accumulation Trusts Conduit Trusts Only take into consideration the primary beneficiary 5

discretion of the trustee(s). Provide maximum creditor protection.

6 Conduit v. Accumulation Trusts Accumulation Trusts The RMD and the principal stay in the trust and are only paid out at the discretion of the trustee(s). Provide maximum creditor protection. The 4 D s Conduit v. Accumulation Trusts Accumulation Trusts Take into consideration the life expectancy of all of the beneficiaries, so careful drafting is essential. Protecting Retirement From Costs of Long-Term Care Average cost of nursing home care is $10,043.28/month 6

Layering Your Designations (cont d) Example (spouse is in a nursing home): Primary Beneficiary: Income Only Protector Trust Contingent

7 Layering Your Designations: Making the Éclair Cake Layering Your Designations Layering your beneficiary designations provides flexibility. Layering Your Designations (cont d) Example (spouse is in a nursing home): Primary Beneficiary: Income Only Protector Trust Contingent Beneficiary: Spouse Tertiary Beneficiary: Children If the surviving spouse is in a nursing home, the Income Only Protector Trust will receive the proceeds from the retirement plan, and the trust principal will be protected from the surviving spouse s long-term care costs. 7

8 Layering Your Designations (cont d) Example (spouse is healthy): Primary Beneficiary: Income Only Protector Trust Contingent Beneficiary: Spouse Tertiary Beneficiary: Children If the surviving spouse is healthy, the surviving spouse, as trustee, can decide if he or she or the trust should receive the proceeds. Layering Your Designations (cont d) Tertiary Beneficiary You can name your children outright or your children s trust shares under a Revocable Living Trust. A Revocable Living Trust provides protection from the 4 D s. Create trust shares for children Zach & Laney Siler 8

9 Dean -Financial Advisor -Twice divorced Taylor -Washed up soap actress -Engaged to guy parents don t like -Lives in her parents rental property Assets: Primary Residence (JT) $300,000 Rental Real Estate (JT) $175,000 Bank Accounts (JT) $15,000 Investment Account (JT) $250,000 Life Insurance (H) $150,000 Life Insurance (W) $50,000 Retirement (H) $450,000 Retirement (W) $110,000 Total = $1,500,000 Designations for Silers Primary Beneficiary: The Siler Income Only Protector Trust Contingent Beneficiary: Zach Siler or Laney Siler Tertiary Beneficiary: 50% Dean Siler s separate trust share created under The Siler Income Only Protector Trust and 50% Taylor Siler s separate trust share created under The Siler Income Only Protector Trust 9

10 The Siler Income Only Protector Trust Trustee: Grantors Trust Protectors: Children Income Bene: Grantors & Children Bene: Children *Upon the 2nd spouse's death, the assets are divided into separate shares & distributed in trust for your children. Dean's Trust Trustee: Dean Bene: Dean, per stirpes Income: T (HEMS) Principal: T (HEMS) *Creditor protection concerns with the beneficiary serving as the trustee. *This trust is a conduit trust for retirement purposes. Taylor's Trust Trustee: Taylor Bene: Taylor, per stirpes Income: T (HEMS) Principal: T (HEMS) *Creditor protection concerns with the beneficiary serving as the trustee. *This trust is a conduit trust for retirement purposes. Laney moves to a nursing home Time for a crisis plan What are the options for their retirement plans? Liquidation of Laney s plans Zach s IRAs protected Annuitization of Laney s plans Zach s trust for Laney Crisis plan option Liquidate Laney s plans: Pay income tax on proceeds May receive money through an income tax refund the following year Proceeds can be spent on Laney s care Proceeds can be used to buy an annuity for Zach Proceeds can be gifted to children through Medicaid gift planning 10

11 What happens to Zach s IRAs? They are not available for Laney s care A nursing home may not tell Zach he can keep his IRAs Zach s IRAs are available if he ever needs nursing home care Make sure Laney is not listed as a primary beneficiary on the IRAs after she is admitted to the nursing home Annuitize Laney s IRAs Only the monthly annuity payments are available to the nursing home if the annuity is Medicaid compliant The amount of income received, and thus the income tax due, is reduced The downside is that the IRA could be exhausted Zach s IRA trust If Laney is in a nursing home and the IRA pays to the trust, the IRA is not an available asset Any RMDs would need to be paid to the nursing home If Laney were not in a nursing, she may be able to receive the IRA outright 11

12 Maxwell Sipe Law Offices, LLC 20 East Sixth Street, Suite 301 Waynesboro, PA (717) Montco Elder Law, LP 608 W. Main St. Lansdale, PA (215)

Married? Husband's name Wife's name Mailing Address:

DATE COMPLETED: Date of Birth U.S. Citizen? Married? Husband's name Wife's name Mailing Address: email address Date and place of marriage Children Child's Date of Birth Married? Grandchildren Parent Grandchild's