May 15, 2023 Weekly Update

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We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

Portfolio Update:  Murs and I have recorded our portfolio update for May 15, 2023

CLICK HERE TO WATCH THE UPDATE

This Week’s Podcast -Why do You Need a HIPAA Authorization?

Listen in to learn how your HIPAA Authorization can connect with your living will or health care power of attorney for information to be shared. You will also learn about the medical information that can be released to an authorized person per HIPAA standards.

CLICK HERE TO LISTEN TO THE PODCAST

 

CLICK HERE TO WATCH ON YOUTUBE

This Week’s Blog – Why do You Need a HIPAA Authorization?

Estate plan packages are something we advise all of our clients to think about, and it often starts with a discussion of a will, power of attorney, and if the person needs a trust. However, there’s one element that should never be overlooked: HIPAA authorization forms.

CLICK HERE TO READ THE BLOG

Why You Need a HIPAA Authorization

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Estate plan packages are something we advise all of our clients to think about, and it often starts with a discussion of a will, power of attorney, and if the person needs a trust. However, there’s one element that should never be overlooked: HIPAA authorization forms.

As part of your retirement planning, you must think about the future and what will happen to you if there’s a medical emergency in your life.

What is a HIPAA Form and What Does It Stand For?

When you’re in a doctor’s or dentist’s office, it’s not uncommon to come across a HIPAA form. You’ll need to sign one of these forms, and it’s not always 100% clear as to what you’re signing. 

HIPAA is short for the Health Insurance Portability and Accountability Act of 1996, and it transformed healthcare. A few things to know are:

  • The HIPAA law protects your information so that all medical issues are kept between you and the doctor
  • A HIPAA form allows for the release of the information to certain parties, such as a spouse or children 

Many people assume that if they’re in the hospital, the hospital will have to call and inform somebody. Unfortunately, this is not accurate and that is why we recommend filling out a HIPAA authorization form.

What is a HIPAA Authorization?

There are two different types of HIPAA authorization forms. The first is when you’re switching health insurance providers and need to release your medical information from one provider to the next.

However, we’re going to be discussing the second type of authorization.

The second type of authorization prevents your doctor from divulging information about your medical condition to someone else. You may incorrectly assume that if you’re in the hospital, you can talk to your doctor and your doctor will be able to release your medical information to specific loved ones.

You can connect your Estate Plan and your HIPAA forms. If you cannot communicate and someone needs to carry out your wishes as outlined in your estate plan, they’ll likely need medical information from your doctor. Asking someone to carry out your wishes will place a huge burden on them, and you don’t want them to be unable to obtain information on your current medical condition and prognosis.

Connecting your HIPAA forms to an estate plan can resolve this problem.

Example of Why HIPAA Forms Are Important

In the last year, we’ve had a few “reminders” of why filling out these forms is crucial in 2023.  We had one couple who was fine one day and then the next, the husband had a massive stroke. He could not communicate or make any facial movements.

The doctors stated that the person had the mental capacity to communicate their wishes, but they were unable to physically communicate.

The wife was left with the burden of communicating with the doctors about what she thought her husband’s wishes were. She had to guess what her husband’s wishes were because he didn’t have any of the appropriate documents in place that stated his desires.

A healthcare power of attorney allows you to list one or more people to make medical decisions. The person in our example has adult children, and the wife was extremely stressed out in this situation. 

A power of attorney, living will and HIPAA form that are all connected would have allowed the husband’s information to be shared with the wife and children. Her children could have taken on some of the burden of making decisions if all of these documents were connected.

I have another example of my own. I was talking to an estate planning attorney and had a son who was turning 18 at the time. My attorney reminded me that once my son reached adulthood, I would only receive limited information from doctors. 

If my son had been in a medical emergency, the hospital would not have been able to share certain medical information with me.

My attorney advised me to have my son sign a HIPAA form that authorizes my wife and I to speak with doctors and have them release information to us on his medical condition. We also have a daughter who will be turning 18 shortly and will need her to sign a HIPAA form as well.

Imagine being a parent and not having the ability to speak to the doctors about your child’s medical condition. It’s a scary prospect that also applies to your parents, spouse or anyone who would want you to know about their medical condition.

What Information is Shared When a HIPAA Authorization Form is Signed?

HIPAA forms authorize medical professionals to give your medical information to those listed on the form. The person listed on the form also has a right to request any information from the medical professional.

Is every piece of information shared?

No.

Social Security numbers, dates of birth and other sensitive information are protected. Medical professionals must also act within the HIPAA standard of minimum necessary. These professionals only need to provide you with the bare minimum of information.

Medical professionals do not need to go through all of your medical history. Instead, they need to provide you with enough information to make a decision on the person’s health.

On the HIPAA authorization, there is no need for a notary or witness. You only need to have the person’s signature and the name of the people they are authorizing information to be released to in the event they’re in the hospital.

The form requires:

  • Signature 
  • Date
  • How you want the form to be used
  • Names of who you want to access your information
  • Form timeframe (length of authorization)
  • Ability to revoke authorization

On the HIPAA form, you just state your medical wishes and who will receive information on your behalf. These forms authorize the individual to receive just the minimum info necessary to make a medical decision if you are unable to make it yourself.

If you name someone who you decide you no longer want on the form, you can revoke the authorization, too.

We truly believe everyone needs a HIPPA form. 

Anyone who wants to sign HIPAA forms can contact us and we’ll walk you through the process.  We do not charge for this. You can also consult with your estate planning attorney to have them fill out these forms with you.

Do You Need a Trust in Retirement?

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Estate planning is something we talk about a lot. For many clients, estate plans can be very complicated because it’s an extra step in their retirement planning process. However, we believe that this plan is so important that we talk to each and every client that we have about it – even prospective clients.

We teamed up with Andres Mazabel at Trust & Will to streamline the process for everyone, and it has worked out well for so many of our clients.

Andres was a special guest on our most recent podcast to answer a question many of you may have: do you need a trust in retirement?

Why Trust & Will was Founded

Trust & Will, Andres’ company, was founded five years ago because more than 60% of families do not have an estate plan. Traditionally, financial advisors that wanted to help their clients with estate planning had to use an attorney for this process.

Now, Trust & Will offers estate planning documents in all 50 states, making the process:

  • Easier
  • More accessible
  • More affordable

While Trust & Will doesn’t replace an attorney, they make the process easier for people to set up their estate plans from the comfort of their own homes. You can even update your plan through the platform and consult with some of the attorneys on the Trust & Will team.

If you have 30 minutes to an hour, you can have your estate plan in place, which is something our clients love. By removing the friction and procrastination in estate planning, we find more of our clients have these important documents in place to protect everything they worked for in life.

Documents Everyone Needs in Retirement

One survey found that the biggest gaps people have when working with a financial advisor are:

  1. Wealth transfer advice
  2. Estate planning advice

Unfortunately, there’s a big gap in consumer knowledge of probate, wills and what happens when they’re no longer around.

With all of this in mind, we believe everyone should have a:

In addition, some of you reading this may also need a trust.

Trust vs Will in Estate Planning

Basic will documents outline, on paper and in legal documents, your assets and how you want them to be divided up upon your death. Then in the middle of this is something called “probate.” 

Probate, or the court process of a judge settling the estate, allows the judge to make the decision of what happens to your assets if you don’t have a will. Let’s look at an example of this:

  • You die without a will
  • You have no contact with your children
  • You wish for your assets to be transferred to your fiancée

In the above scenario, your estate would be settled in probate. The judge, who has no knowledge of your family dynamics, will split the assets in accordance with the law, and a large portion will go to the children you haven’t heard from in years.

Of course, your parents and siblings may also receive some portion of your estate.

A trust helps your estate avoid probate.

Depending on the state you live in and the assets you have, you may or may not need a trust. In California, if you have taxable accounts above $184,500 (this figure can and does change), these assets will go through probate.

Without an estate plan, a person who exceeds these amounts would have their assets go into probate and then keep the family in probate for 12 months or more.

You don’t want to keep these assets from your family for a year or more.

A trust can be set up to allow you to direct your assets the way you want and at the time that you want. Additionally, the details of the trust are private, but probate is a public matter that anyone can see.

For example, with a trust, you can:

  • Give your kids all of the funds at once
  • Give your kids a percentage of a fund at certain age or life milestones
  • Set money aside for charity

What You Should Know About Creating a Trust

A trust, in its most simple form, is a legal agreement, in which some ways, creates a legal entity. A revocable living trust is the most common form of a trust, and while you’re alive, you can manage the trust, update beneficiaries and have a successor trustee in place.

When the trustee is no longer around, the successor trustee will step in and then be in charge of executing your wishes for the trust. You have a lot of options on who you can choose as your successor trustee, such as:

  • Family member
  • Spouse
  • Someone you trust

You also have the option of hiring a corporate trustee who you pay to execute the plan that you have for your trust. 

If you have an estate under $5 million, most people don’t need a corporate trustee. However, if your estate is worth more than this amount, it may be worthwhile to use a corporate trustee to manage the trust when you’re gone.

Trusts and estate plans can be modified and adjusted while you’re alive because your plans will change over time.

Example Situation of a Trust in Action

Visualizing the benefit of a trust in retirement is easier with an example. Let’s say that a person has:

  • An IRA with beneficiaries in place
  • A house or vacation home

Logistically, with the houses, they would go through probate if you didn’t have a will in place – if the asset was in your name only. Perhaps the asset was purchased before you were married, so it’s not part of your marital property either.

If you pass away suddenly, the real estate will go through probate because no one else is on the deed.

A trust would “own” the real estate, which transfers the deed of the property to the trust, and in a good number of states, you can do a deed transfer, too. Deed transfers allow you to pass the property to someone else without a trust.

However, a trust ensures that the property is transferred before your death so that you can leave it to someone else via your trust’s plan.

You may also have taxable accounts that would undergo a very similar process, such as:

  • Bank accounts
  • CDs
  • Investment accounts (not under an IRA or Roth IRA)

Proper titling of these accounts (such as having named beneficiaries) can help you protect these assets.

A trust allows you to either transfer the asset to the trust or leave the trust as the beneficiary if you wish. Retirement accounts are often not included in a trust. Instead, these accounts often have a beneficiary listed who takes over an account.

Trusts can also help you with business succession, allowing you to pass your business to someone else or have it liquidated.

Do You Need a Trust?

You may or may not need a trust, but you always want to avoid probate. If you have cash assets that can have beneficiaries added to them, the account avoids probate. However, if you have real estate, a business or other assets that do go through probate, a trust may be in your best interest.

We find that a trust is in your best interest in certain states and not others.

Texas is a state that offers fast and efficient probate, so you likely don’t need a trust if you live in Texas. With that said, we recommend that you take the time to talk to your financial advisor or estate planning attorney to determine if a trust is in your best interest.

Our clients have access to Trust & Will as part of our service, but you can also visit https://trustandwill.com/ to set up your own trust and will online.

If you have any questions about your trust, will or financial future, contact us and we’ll help you in any way that we can.

March 13, 2023 Weekly Update

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We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

Portfolio Update:  Murs and I have recorded our portfolio update for March 13, 2023

CLICK HERE TO WATCH THE UPDATE

This Week’s Podcast – Do You Need a Trust in Retirement?

In this Episode of the Secure Your Retirement Podcast, Radon and Murs discuss the importance of having a trust as part of your retirement plan with Andres Mazabel. Trust & Will provides an “easy and secure” way to create estate plans and settle estates online, with the ability to customize legal documents.

CLICK HERE TO LISTEN TO THE PODCAST

 

CLICK HERE TO WATCH ON YOUTUBE

This Week’s Blog – Do You Need a Trust in Retirement?

Estate planning is something we talk about a lot. For many clients, estate plans can be very complicated because it’s an extra step in their retirement planning process. However, we believe that this plan is so important that we talk to each and every client that we have about it – even prospective clients.

CLICK HERE TO READ THE BLOG

Beneficiary Designations – What You Need to Know

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Beneficiary designations are so important. You’ve set up accounts for estate and retirement planning, paid your dues, and you want to be sure that the right person is left these accounts. Sometimes, you might not even know about designations for certain accounts, so this is an article that we think can help a lot of you that trust in our Secure Your Retirement podcast.

If you haven’t subscribed to our podcast already, we highly recommend you do here.

In this episode, we’re going to cover everything you need to think about, including:

  • Beneficiary designations
  • Taxes
  • More 

Beneficiary Designations 101

First, it’s important to know which accounts are almost required to have a beneficiary. These accounts include:

  • 401(k)
  • 403(B)
  • IRA
  • Life insurance
  • Etc.

These accounts will often require a beneficiary or a person to who you want the account to go to upon your demise. You’ll be able to choose a primary and contingent beneficiary, too.

Retirement accounts are the most common accounts that need beneficiaries.

Other accounts that you should add beneficiaries to include:

  • Brokerage accounts
  • Bank account
  • Savings account

You may find a name other than the beneficiary, such as “transfer on death,” and you should be filling these out.

What is a Primary and Contingent Beneficiary?

Primary and contingent beneficiaries were mentioned previously. What do these things mean?

  • A primary beneficiary is the main person who would gain control of these accounts upon your demise.
  • Contingent beneficiaries are the person(s) who will receive the account if the primary beneficiary isn’t alive.

You can even have multiple beneficiaries, all of which will receive a percentage of the account. For example, you can have four beneficiaries, all of which receive 25% of the assets in the account, or whatever percentage that you choose.

What Happens If You Don’t Have a Beneficiary?

When no one is listed on your accounts as a beneficiary or the only person listed is no longer alive, the account will go to your estate. The problem with the account going to the estate is that a large chunk of the money will be lost to upfront taxes.

Instead, if a beneficiary receives the money, they can leverage tax strategies to save money.

Gaining Greater Control Over the Money

You can gain greater control of the funds and the way they’re transferred by using certain designations. Thankfully, there are only two that you really need to know about:

  • Per Capita: The default on beneficiaries. For example, if you have two primary beneficiaries with 50% of each asset divided equally among the two. If one beneficiary dies, all of the money will go to person number two as your primary beneficiary. The shares of a beneficiary that is no longer living is split equally among all primary beneficiaries listed, no matter how many there may be.
  • Per Stirpes: You can also choose per stirpes. A powerful and useful tool, this means that the assets will go down your lineage. So, if you have two people as beneficiaries and the first beneficiary dies, the funds they would receive will go to the next person in their lineage. So, the money would go to the person’s kids instead of the remaining beneficiary.

As you can see, designations when adding beneficiaries are very powerful tools that can help you gain greater control over who receives your assets.

Many clients of ours are concerned about the future and their assets. For example, many of our clients ask, “What happens if a grandchild is born?” Using per stirpes, the assets will include them in your lineage.

For example, let’s assume that you have a son, and they have a child. The child automatically becomes part of the per stirpes designation. 

Most people will list their spouses as a primary and their children as contingents on their accounts because it’s a way to ensure assets are passed on to the people you care about the most.

Power of Per Stripes Example

Let’s assume that you have passed away, and you have a substantial amount of money in an IRA or 401(k). You might also leave money to your son or daughter, who is a good income earner. Due to their high income, per stirpes can be very beneficial.

Why?

Your children can disclaim their inheritance to allow it to flow down to your grandchildren.

Why is this beneficial?

If the grandkids don’t have large incomes or maybe are even too young to work, they’ll be in a much lower income bracket than someone who is a high earner. In this scenario, more of the money will go to your family and less will go to the government for taxes.

But the per stirpes designation must be present for this to work.

Annual Beneficiary Review

Conducting an annual beneficiary review is something we recommend all of our clients do, and we highly recommend that you do a review, too. The main reason for a review is that it’s just too easy to forget about beneficiary changes.

You may have been divorced, a beneficiary died, or you may have been married.

Annual beneficiary reviews will ensure that the right people benefit from the assets you leave behind.

We have a story of someone who divorced, then remarried.  The beneficiary was never updated.  When they passed away, all of the funds in the account went to the ex-spouse and there was nothing that the current spouse could do to challenge the transfer of assets.  Due to the strength of the beneficiary form, there is no way to challenge the form or beneficiary listed.   

This is why we recommend annual beneficiary designation reviews.

You can also list charities as beneficiaries, which is something you may want to do if you’re passionate about certain charities.

It’s very easy to adjust beneficiaries, and you can even do the process online for some accounts. Offline changes require a simple form submission to change beneficiaries.

Tip to Help Beneficiaries

One thing we recommend is that you sit down and make a list of all accounts that you have. Your estate will have a difficult time trying to find all of the accounts you have if you don’t create a list for them.

Additionally, we’ve had some clients find out about accounts well after a person’s death because no one knew they existed.

If you don’t create a list of accounts, you’re putting any of the beneficiaries you use at a significant disadvantage. Also, this same list can be used by you to update and review accounts annually, so it’s a win-win for everyone involved.If you have any questions about beneficiary designations, feel free to schedule a 15-minute complimentary phone call with us.

2021 Tax Deductions and Tips

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Tax professionals offer the best option for learning about 2021 tax updates. A good CPA can provide you with updates that can affect you when filing your taxes and can hopefully reduce the taxes you owe or increase the refund you’re owed.  Here are some suggestions from a CPA that we know and trust.

2021 Tax Updates You May Have Overlooked

Charitable Tax Deductions

Charity tax deductions are still available, allowing you to take advantage of giving away some of your money. One of the main differences this year is that you’ll need to itemize your charitable tax deduction, which is an unexpected change for a lot of people.

You can deduct at least $300 for an individual or $600 for a couple.

Itemizing your deductions only makes sense when you have more than the standard deduction of $12,500 or $25,000 for couples. For example, it makes more sense not to itemize your deductions when the itemized deduction comes out to less than the standard deduction.

Straight donations are mostly the same, so it’s important to get a receipt. You should be itemizing deductions to really leverage straight deductions which may include:

  • Cleaning out your attic
  • Donating items to Goodwill or another charity

When you’re donating to charity, you can donate up to 60% of your adjusted gross income for tax purposes. Most individuals will not hit this threshold because it’s high, but it is something high net worth individuals may want to think about.

Bonus: Qualified Charitable Distributions (QCDs) are for people older than 70.5, and it allows you to take money out of your IRA and donate directly to charity. This can be done on top of your standard deduction and must be made out directly to the charity. When you do this, you’re not taxed on the withdrawal and you can deduct the donation on your taxes to offer a double benefit to you.

Medical Deductions

When you’re older, closer to retirement or have had to pay for medical procedures in the past year, medical deductions are something that you should be considering. A lot of medical deductions can be made:

  • Insurance
  • Prescriptions
  • Direct doctor costs

If you have a major deduction, you may want to itemize to leverage these deductions. The $12,500 or $25,000 deduction will need to be considered because there’s really no reason to itemize if you’re not trying to deduct higher than this amount.

Reaching a high enough threshold to itemize your medical deductions is often only possible when you’ve had major medical procedures performed. A few of the procedures that may be included are:

  • Dental implants
  • Nursing care
  • Other major issues

Earned Income Tax Credit

The earned income tax credit is based on how much you earn and how many qualifying children that you have. You need to be between 25 and 65 years old and have qualified earned income. A person must earn $16,000 as a single person or $22,000 as a couple to maximize this credit.

When you hit $51,500 as a single person and $57,500 as a couple, this is when the earned income tax credit starts to really phase out for you.

If you have no children, you can expect up to $543, and with three children, $6,700.

Child Tax Credit

A $2,000 tax credit is given to a qualified child between the age of 0 and 16. Once they hit 17 and older, this credit drops to $500, which is quite a jump. The year that the child turns 17, the credit is lowered.

There is also an income threshold for this credit:

  • $200,000 for a single person
  • $400,000 for a couple

Home Office Deductions

A lot of people are working from home this year. COVID has changed a lot of people’s working situations, and there are a lot of questions surrounding home office deductions. Employees that receive a W2 are no longer able to deduct their home offices.

Business owners can write off their home office if it remains their primary place of business.

You can deduct $5 per square foot, or you can itemize your deductions. The itemization is only beneficial if you can deduct more than the square foot value of your office. Remember to keep receipts on all of your expenses from your home office to ensure that you can maximize your deductions and have proof of your expenditures.

If you only work from your home office once or twice a week, you won’t be able to claim this deduction because it’s not your principal place of business if you’re working more days per week outside of your home.

Unemployment Benefits and Your Taxes

All of your unemployment income is viewed as wages. The income is reported on a 1099G, which you will use to claim all of these benefits on your taxes.

Bonus: Stimulus Check and Claiming It as Income

You do not need to claim your stimulus check on your tax return.

Tips When Thinking About Your 2021 Taxes

A few of the tips that we want you to know about when thinking about your taxes in 2021 are:

  • Financial management to manage your portfolio can help you leverage capital gains rates at the current rate.
  • Employee benefits should be managed, such as HSA, 401(k) and other options. Maximize your 401(k) and consider an HSA to use for your health expenses. The HSA can be funded and grow, and by the age of 65, you can take out the money while enjoying tax benefits. Otherwise, the HSA withdrawals all need to be medical related.
  • Review federal withholdings early in the year to ensure that your withholdings are proper. Recent changes to the withholding rate have left many people paying more at the end of the year than they expected. Use the IRS.gov Tax Withholding Estimator to properly adjust your rates at the beginning of the year so that you have fewer surprises at tax season.
  • Try and donate $300 to $600 to a charity this year for additional savings.
  • If you’re going to itemize, consider giving more to charity if you can. Double up on donations to maximize your deductions.
  • Mortgage interest rates can also be deducted on the itemized deductions.

On a final note, be sure to be compliant and file your taxes on time or get an extension. Also, make all of your estimated payments and pay what you think you’ll owe on April 15 because you’ll be penalized otherwise even if filing an extension.

 If you want more information about preparing your finances for the future or retirement, check out our complimentary Master Class, ‘3 Steps to Secure Your Retirement’. 

 In this class, we teach you the steps you need to take to secure your dream retirement. Get the complimentary Master Class here.