Ten Tips for Social Security Planning

We here at the Law Blogger are quietly aging along with the rest of our fellow Baby Boomer generation.  A good chunk of this generation is slipping into retirement mode; slowly, but as surely as ever.

Here are some things to keep in mind as you approach the age where certain decisions need to be made; and elections need to be taken relative to the mighty Social Security Administration.

Many folks are faced with a bewildering array of options regarding their social security benefit.  When should  you start taking the benefit?  At the earliest possible age of 62; or should you wait [can you afford to wait] until age 70?

These tips are merely general principles, not intended as specific legal advice.  Here are some things to consider:

1.  Spousal Benefits.  If you are married, and at full retirement age [66], you and your spouse, but not both, can elect to receive a spousal benefit while deferring on your retirement benefits, thereby enabling those retirement benefits to grow.  If you are the low-earning spouse, however, it could make more sense to take your benefit at the earlier age of 62, then switch to your [presumably higher] spousal benefit upon reaching full retirement age.

In general, there is no advantage to waiting to start collecting either spousal benefits or survivor benefits after you reach your full retirement age.

2.  "Start Stop Start" Strategy.  Complicated, but worth it, this strategy involves electing to take your social security benefit at an early age, say 62, then suspending the benefit at the full retirement age of 66, if you can afford to do so.  Then, at age 70, you start the benefits back up, taking advantage of a much higher [over 30% higher] monthly benefit checks for the balance of your life.

3.  One-Year Repay Option.  This one is interesting.  If you elect to begin taking your benefit, but later decide it was not the right move, you have one year to pay back all the benefits you received.  Then you can re-apply for [higher] benefits at a later point in time.  

4.  Working Into Your 60s.  If you are blessed with good health, and are fortunate enough to be in a profession or job you can handle deep into your 60s, the result will be a significantly higher social security benefit when you finally do hang up the cleats.  This benefit will also accrue to any spousal and child benefits; so your family will benefit as well.  If you opt to receive benefits at an early age [62], you could be locking in on a permanently lower benefit.

5.  Divorced?  Depending on the length of your marriage, you or your ex-spouse may be able to file for benefits based on each other's work histories.  This is beneficial for the divorcee that was married to a high earner.

6.  Federal Income Tax Exposure.  When it comes to calculating your income for tax purposes, disbursements from a Roth IRA are not counted [because you already paid the taxes], but withdraws from a regular IRA, 401(k) or 403(b) are included as income.  Therefore, it may make sense to stage your withdraws on these accounts, taking disbursements from the tax deferred accounts prior to your social security election.  Also, as a general principle, it would make sense to deplete your tax-deferred accounts first.

7.  Survivor Benefit Election.  Widowed?  Some folks will want to elect to receive their survivor benefits at age 60, and to take their retirement benefit after full retirement; others will benefit by electing to take their retirement benefit at age 62, and deferring the survivor benefit until full retirement age.  The difference depends on individual circumstances and the projected benefits.  A careful calculation is needed here and a professional should be consulted in most cases.  The differences in strategy could be significant.

8.  Beware of the SSA's Benefit Calculator.  The SSA's on-line benefit calculator does not adequately handle spousal, divorcee, child, mother, father, widow or widower benefits.  Because the benefits calculator does not factor-in wage growth or inflation, a projected benefit output for a younger worker performing a calculation will be distorted; the worker's actual benefit could be much less than anticipated.  The best practice is not to rely on these calculations as accurate benchmarks.

9.  Children's Survivor Benefits.  Provided they are under the age of 18 [age 19 if still in high school], your children can receive a survivor benefit from your deceased spouse, or ex-spouse.

10.  Enjoy Your Retirement!  This tip is the most important in this  post.  You have worked your entire life; now it's time to take your foot off the gas and cost a bit; take a look at the scenery.  By all means take care of your family, but remember that you cannot take it with you.  So be sure to spend at least a portion of your retirement on yourself.

www.clarkstonlegal.com
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Posted in: divorce,estate planning,income tax,lawyer,retirement,Roth IRA,Social Security,spousal benefit

Your Digital Estate Plan

Do you ever wonder what becomes of a deceased person's Facebook profile?

Increasingly, folks are compiling several digital profiles on the ever-popular social media sites now embedded into the Internet.  Many of us have thoroughly fleshed-out these electronic profiles.

Well, what happens to your digital persona when you die?  How do we assist our family members with the dismantling of these often extensive robust electronic profiles?

Below are examples of typical digital "assets" contained in an average modern person's legacy:

• Social media profiles such as Facebook, LinkedIn, YouTube and a host of others
• Professional profiles [I maintain at least a half dozen and counting]
• Bank accounts, loan accounts, mortgage accounts
• Investment accounts such as eTrade or Ameritrade
• Uploaded photos
• Uploaded articles
• Education accounts, including alumni account profiles
• Gaming sites
• Email profiles and communications [Most people have at least two email accounts these days.]
• Digital media accounts
• Cloud computing profiles or accounts
• On-line store accounts, particularly those with a social media angle such as iTunes and Amazon

There are other examples, to be sure.  Any site that you've had to log-on to, create a profile, and post content, or place orders, is a component of your digital inventory.  That's a lot to keep track of...

If your situation is typical, you have some similar passwords, or a theme running through your accounts, but due to the specifications of the particular site, most of your usernames and passwords are different.  Also, you probably maintain a list of your names and passwords somewhere; perhaps on your computer.

There are, of course, some web-based products and services that assist with the management of your digital profile:

• roboform.com
• stickypassword.com
• datainherit.com

The first step in managing your digital legacy is to list all of your on-line "assets" and list the usernames and passwords associated with those accounts.  You will be saving a family member or friend untold hours on the phone, or on the computer, when they try to figure it out in your absence.

Once you have compiled your all-important digital inventory, the next step is to reference this list and attach it to a power of attorney document.  This will allow your attorney-in-fact to manage your accounts in the event of your temporary absence or incapacity.

Ditto to your will; include an instructional paragraph referencing and attaching your digital inventory.

If no instructions are provided, Michigan does not yet have laws governing the posthumous management of a person's on-line "assets".  So far, only Oklahoma and Idaho have such laws, with Nebraska not far behind.  [Where is California in all this?]

Therefore, if you die "digitally intestate", what happens to your digital profile is up to the particular service provider.  For example, Facebook has long taken the position, based on its robust operating agreement that you agreed to when creating your account, that FB owns all of your posts and content.  When you die on Facebook's watch, they memorialize your account; restricting views and posts to friends and family.  Also, the account is closed if requested by your next-of-kin.

Some folks, however, do not have any next-of-kin.  What then?

Here are some options for the proactive among our readers.  Some posthumous services will send an email composed by you, or by your designated personal representative, to a designated list of contacts.  Here is a sample list of such services:

• Online-Legacy.com
• mywonderfulllife.com
• ownlegacy.com

Call it another characteristic of our modern life; once we are gone, our digital profile lives on for a time.  In this fast-paced era, however, it's amazing how fast such a profile will become outdated.

Taking the right steps will allow you to manage that profile from the grave...

www.clarkstonlegal.com

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Posted in: digital assets,digital inventory,digital legacy,estate planning,Facebook,Linked In,YouTube

When Dementia Renders Your Spouse a Stranger

Richard Webber & Adele of Grey's Anatomy

Dementia, always a sad development for any family, is particularly cruel in long-term marriages where one spouse is afflicted, and the other is left to pick-up the pieces.  In such cases, marriages are often stressed to the break-point.

This issue has received national attention lately, courtesy of the hit television series, Grey's Anatomy, where Dr. Webber's character is losing his wife, Adele, to Alzheimer's.

Alzheimer's disease is the most common form of progressive dementia.  Recent scientific findings, however, suggest that there may be many sub-types of dementia.

For example, frontotemporal degeneration [also known as Pick's disease] manifests itself much earlier than Alzheimer's and progresses faster.  Frontotemporal degeneration is believed to afflict between 50-60 thousand adults in the United States, compared to the 5 million Americans afflicted with Alzheimer's.

Frontotemporal disease is particularly threatening to a marriage due to the swift onset of symptoms which attack a spouse's personality directly; not just with the onset of memory loss, as in much older Alzheimer's patients.  The non-afflicted spouse often feels ignored, snubbed or maligned because of the most common characteristic of the disease: silence.

Like many diseases, frontotemporal degeneration progresses differently in individuals, taking on a life of its own.  Most cases feature a prominent and swift deterioration of the patient's overall personality; a complete breakdown in the patient's ability to communicate with and care about others.

Obviously, the patient's ability to hold down a job, or to hang onto their marriage, is put to the test.  This is because frontotemporal degeneration attacks the frontal temporal lobe of the brain; the region responsible for decision-making and judgment.  The frontal lobe actually shrinks.

Sometimes, one disease is mistaken for the other, leading to confusion among the family care providers and a confusing series of hospital stays, doctors visits and testing.

Dementia, in general, highlights the need to secure a solid estate plan early in a marriage, before the onset of any incapacity.  Once a dementia sets in, an individual could lose their mental capacity and have a guardian and conservator appointed to manage their affairs.  While this fiduciary could be, and usually is, a family member, no estate planning is possible while a loved one is under such legal incapacity.

I you or a spouse have been diagnosed with dementia, here are some local support groups that may be of use:

• Alzheimer's Association;
• National Family Caregivers Association - [developing e-communities to provide support and information]
• Association for Frontotemporal Degeneration - [referencing a support group in Grand Rapids, MI]

In the meantime, if you are enjoying the fruits of good health, do not take it for granted.  Be proactive and get an estate plan executed.

www.clarkstonlegal.com

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Posted in: Alzheimer's disease,conservatorship,dementia,divorce,elder law,estate planning,frontotemporal degeneration,Grey's Anatomy,guardianship,Pick's disease,Richard Webber

Preparing for a Second Marriage

Many factors affect whether a second marriage will last: the relative age and incomes of the partners, whether either party has children, cohabitation prior to the second nuptials, and the education level of the parties.

And, of course, how could we forget the personality of the ex-spouse; perhaps the most important factor of all.

According to statistics published by the National Institute of Health, approximately 15% of second marriages end within 3-years; and 23% end within 5-years.  Overall, however, the divorce rate for second marriages has drawn even with that of first marriages; about 40%.  Also, in its 2009 report Marital Events of Americans, the Census Bureau claims first marriages last, on average, about as long as second marriages: about 8-years.

Here are some things to think about, and some steps to consider, before tying the knot for the second time.

Prenuptial Agreement.
For those with assets, this document is a must.  To be enforceable, the prenuptial agreement largely depends on two things: a) full disclosure by both parties of all their respective assets; and b) legal representation of each party by separate lawyers.  If your partner does not want to sign such an agreement, then you should seriously consider cohabitation rather than marriage.  This is a harbinger of trouble in the event of a split.

Couples with only modest estates going into second marriages generally do not need the complication of a prenuptial agreement.  If a marital estate grows during the second marriage, that estate will be subject to an equitable property division in the event of divorce.

Solid Estate Planning.
Prior to a second marriage, assets may be transferred into a trust for the benefit of the owner's children.  Also, retirement asset rollovers (from a 401(k) plan into an IRA, for example) can operate to protect the new spouse with survivor benefits, or not, as the case may be.

A Qualified Terminable Interest Property trust (QTIP) typically provides for interest income going to a surviving (second) spouse, with the principle going to the settlor's children from her first marriage upon the death of the second spouse.

Children from a prior marriage can also be provided for using an Irrevocable Life Insurance Trust.  This way, the new spouse can be designated as the beneficiary on the person's retirement assets and the children are designated beneficiaries of the death benefit from the life insurance policy.

Another common practice is to create a separate trust to provide for the distribution of separate property to the children from the first marriages and to create a joint trust to provide for the distribution of the marital estate of the second marriage.

Good Premarital Counseling.
One of the best things a couple can do prior to tying the second knot is to participate in joint counseling.  This should include religious counseling or premarital couples therapy, financial advice, and (separate) legal consultation.  Once separate legal counsel is received, the couple can certainly compare notes in order to get on the same page.

Going into a second marriage with your eyes open improves the chances of a successful nuptials.  When selecting an attorney to assist you with the necessary planning, find one that truly listens to your expressed wishes and pays close attention to the characteristics of your estate.

www.clarkstonlegal.com

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Posted in: divorce,estate planning,family law lawyer,marital estate,marital property,second marriage,trust

Huge Claims Resolved in Davidson Estate

When you die a billionaire, your estate is often going to be heavily litigated before a certificate of completion is filed with the probate court.  Particularly when your widow (and business partner) is not the mother of your children.

Another ingredient for guaranteed protracted probate litigation: last minute changes to your will.

Local billionaire Bill Davidson's estate had all of these characteristics.  After his death in March 2009, Davidson's estate was estimated at well-over a billion dollars.

Davidson parlayed his fortune from Guardian Industries, a glass company, into a sports empire that once included world-champions Detroit Pistons and Detroit Shock, as well as the Tampa Bay Lightning hockey team, and the Detroit Fury arena football team.

The estate and the $20 million claims filed against it, first denied but then eventually settled, are all on file with the Oakland County Probate Court.  The terms of the settlement, however, are not.

Apparently, the problem arose when Davidson made changes to his 19-page will during the last week of his life.  Those testamentary amendments broke-up Davidson's estate into three separate trusts and named his wife, a son and a daughter, all Bloomfield Hills residents, as the sole beneficiaries.

The probate litigants pitted Davidson's spouse and owner of the Detroit Pistons, Karen Davidson, against his son and daughter.   The dispute involved claims against the estate filed by Milestones Upgrading & Industries Co., an Israeli company, and Big Ben Investments; companies with which Mr. Davidson had a long business-relationship.

The claims filed by Milestones and Big Ben alleged that Mr. Davidson made up to $20 million in investment pledges to the companies.  Karen Davidson, listed as a manager for Big Ben, wanted her husband's estate to honor the pledges, saying they were consistent with Mr. Davidson's testamentary wishes.

In collateral "breach of contract" litigation assigned to Oakland Circuit Judge Nanci Grant, the corporate plaintiffs also privately settled the circuit court disputes via stipulated orders of dismissal in July.

While these large probate and circuit court disputes were being negotiated and resolved, you may recall rumors that Karen Davidson was shopping the Detroit Pistons for an interested purchaser.  Fortunately, the Davidson Estate has enough money to resolve the expensive claims made against it and to apparently keep the Pistons right where they are; in the suburbs of the "D".

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Posted in: Bill Davidson,Detroit Pistons,estate planning,Karen Davidson,Oakland County Circuit Court Judge Nanci Grant,Oakland County Probate Court,probate court litigation