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Senior Citizen's Guide

Estate Planning

Do you spend more time planning your vacations than planning for your future? You do not have to be wealthy or college educated to be concerned about planning. You need only to care about yourself and your family. Planning your estate can be as simple as paying attention to how your assets are titled and who your beneficiaries are. Meeting with someone who understands ownership, taxes, and estate law, is essential.

In Pennsylvania, the best way for husband and wife to own property is jointly. Married couples who own property jointly are said to own it by the entireties. This means that the jointly owned property is exempt from the creditors of only one of the two. For example, John and Mary own all their assets together. John goes out and opens a credit card account without Mary knowing about it. He buys that fishing boat and fishing gear he's always wanted. But, John can't pay the bill when it's due. Both John and Mary can rest assured that, because their assets are jointly owned, they are protected from the finance company. In fact, if John dies first, Mary gets all jointly owned assets free of John's obligation to the fishing equipment company.

However, with every general rule there are exceptions. Suppose John and Mary are in their second marriage. Each has children from a prior marriage whom they love and want the best for. Mary sells everything and moves in with John. She gifts all the cash from the sale of her assets to her children. John makes a good living and can easily take care of Mary. Being old fashioned, John adds Mary's name to his savings, checking account, and house. He and Mary always intend to make a will, but never get around to it. John gets ill, and Mary and his children take care of him. Mary's children don't bother. John dies, and Mary, being the joint surviving owner, gets the checking account, the savings, and the house. She never had the heart to take John's name off the accounts or the deed. She never makes a will. John's children continue to care for Mary. Mary dies. What happens? All of John's property goes to Mary's children because she died without a will.

While owning property with your spouse is generally good, owning property with a third party can be disastrous. Elizabeth's husband was a good planner. He had left his wife with a house, no debt, a nice pension, and healthy savings. She was set for life. Elizabeth had heard that she should avoid probate by putting her children's names on the property. She decided that she would add her son to the deed because he never owned a house. She added her daughter's name to the savings. A pretty fair split, thought Elizabeth. Elizabeth's son and his wife had a small business at which they worked very hard. Unfortunately, times got very difficult, and they were forced by their creditors to file bankruptcy. The son had to list his ownership interest in Elizabeth's house even though his name was only on the deed "to avoid probate". Elizabeth now was forced to take money from her savings to buy back her son's interest in her house.

A spouse should be the beneficiary of your IRA, 401(k), or profit sharing plan. Charlie understood this and had his wife as his primary beneficiary, and then his two sons as additional beneficiaries. Charlie's wife got Alzheimer's, and was going into a nursing home. He was concerned that he would lose everything. He learned that he would be able to stay in the house he and his wife owned and he would be able to keep his car. This made Charlie happy, but he still needed money to live on. His Social Security wasn't enough. He needed his IRA, worth about $150,000, to supplement his income. Through planning, Charlie kept his IRA, and his wife still qualified for medical assistance to pay for her care. He never took his wife off his IRA as beneficiary. Charlie died, survived by his wife and two sons. What happened? His wife got all the money in his IRA, money that ultimately went to the State to reimburse it for the payments it had made for long term care. Charlie's wish that his sons inherit something was never fulfilled.

These little stories are all true, or at least based on fact. All resulted because the people did not spend time planning, or did not follow through with their plans. They did not focus on the details. A good financial planner helps you concentrate on the details that are important to you. The right focus for you depends on your situation and not that of someone else. Estate planning is like throwing a stone into a lake. One action causes many ripples, and it's best that you consult someone who is able to advise you on the potential impact of those waves when they hit the shore. Plan your estate today so you can spend your time enjoying your vacations in the years to come.

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