If your ex-spouse had higher earnings than you and you meet all of the criteria, there may be an opportunity for you to increase your Social Security benefit. So you’re not in love anymore—or maybe you haven’t seen your ex in decades—you might be able to reap one last benefit from the marriage.
An Aitken (SC) Standard’s recent article asks, “What can you expect from your ex's Social Security?”
The article reminds us that benefits for a divorced person and the qualifications for those benefits, aren’t mentioned on your online Social Security statement. As a result, many of these benefits go unclaimed. Therefore, to obtain benefits based on your ex’s work record, your ex must qualify for Social Security benefits. There are these additional requirements:
If you remarry, you typically can’t collect benefits on your former spouse's record, unless your later marriage ends.
The benefits you can get as a divorced spouse are half the benefits he/she would receive at full retirement age. You can start collecting your ex's Social Security at 62. If you start at that age, you’ll permanently lower your benefits. That’s because you're not waiting to claim until your full retirement age, which for most current retirees is age 66. If your ex-spouse hasn’t applied for retirement benefits but can qualify—you can receive benefits on their record, if you’ve been divorced for at least two years.
Let’s say that you were born in 1955, and you opt to file at 62 for your ex-spouse's benefit. Your benefit will be 70% of the amount you’d otherwise be eligible for at your age 66. If you were born before January 2, 1954 and have already reached full retirement age, you have the option to receive only the divorced spouse benefit and you can delay receiving your retirement benefits until as late as age 70. But if you were born after January 2, 1954, that option is no longer available. Therefore, if you file for one benefit, you’ll be effectively filing for the greater of yours or that amount based on your ex’s record.
If you’ve yet to reach your full retirement age and continue to work while receiving benefits, your divorced spouse benefit will be reduced by $1 for every $2 you earn above the annual limit. The 2017 limit is $16,920.
There is one last detail to consider. If you held a government job and your income was not subject to Social Security deductions while you were working, it is possible that any Social Security benefits based on your ex’s earnings history may be reduced.
Reference: Aitken (SC) Standard (May 20, 2017) “What can you expect from your ex's Social Security?”
Five major challenges need to be addressed once you are about five years away from retirement, says Kiplinger in a recent article, “Near Retirement? 5 Plans You MUST Have in Place.” This is the time when you may want to bring in some professional help, rather than go it alone.
You may be ready to move from accumulating money to protecting what you already have. At this point, there are some important decisions that need to be made. For example, you will need to decide when to take Social Security, how to take your pension (if you have one), how to structure your savings to be sure you don’t run out of money and how to plan for taxes, inflation and long-term care costs.
Here’s the five “must haves” to help you with your retirement challenges:
This is the time when the experienced professionals can help you navigate the challenging decisions and complex calculations ahead. Even if you have spent your career as a business owner or high level executive who managed your 401(k)s and investments without help in the past, what’s coming will be more challenging. An estate planning attorney can help navigate a smoother ride to retirement.
Reference: Kiplinger (May 2017) “Near Retirement? 5 Plans You MUST Have in Place”
The business side of Prince’s estate is now taking center stage, as the probate mess that resulted from the visionary artist’s failure to create an estate plan has moved forward. It’s time to monetize an extraordinary legacy.
Prince’s drive toward total personal control extended to the point where he did not plan for a world without him in it, says Trust Advisor in a recent article, “Prince Heirs Named, $300M Estate Now Free To Chase Every Dollar.”
Without a will, it took six months to pay the funeral tax bill and a year for the probate court to clear his sister and five half-siblings as heirs. There is now talk that a distant relative will make a viable claim for a full share of Prince’s $200-$300 million estate.
When Prince died last year, managing his estate was the job of a local company, Bremer Trust. They hired an entertainment industry team to put the recording affairs in order. The team will turn his intellectual property into cash, which was sorely needed with the initial estate tax payments due early this year.
They had to come up with a $12 million deposit on what could eventually be a $100 million estate tax bill. The industry managers signed new recording rights contracts and a large book advance on royalty payments to pay the IRS. Although the hastily signed deals weren’t perfect, the alternative was to just allow the IRS to seize a share of the rights as payment in kind.
Now that the heirs have aligned their interests, they will next determine whose advice they’ll follow on the strategic questions. They have some breathing room with the IRS, so they can try to get the biggest possible lifetime cash flow now. This means returning to those quick licensing deals designed to generate instant income—paying a few million dollars—just to get the right to renegotiate for a better offer.
Many entrepreneurs and business owners do the same thing as Prince. They place a high value on their own talent and can’t imagine how their businesses will continue without them. Therefore, they avoid having a will or estate plan created. Family members and the courts are left to clean up the complexities. Don’t be like Prince. Work with an experienced estate planning attorney to create a will and make a plan for a world without you in it.
Reference: Trust Advisor (May 22, 2017) “Prince Heirs Named, $300M Estate Now Free To Chase Every Dollar”
While an estate plan created while he was living was acceptable to all parties while he was living, only five months after his passing, Thicke’s two oldest sons have filed a petition with the LA County Superior Court regarding claims that the actor’s widow, Tanya Callau, is challenging the terms of the couple’s 2005 prenuptial agreement.
The Fox News article, “Alan Thicke's sons in legal battle with his widow over his estate,” reminds us that the actor died unexpectedly at age 69, when a major artery ruptured while he was playing hockey with his younger son, Carter.
A month before his death, the latest version of his living trust was drafted, offering control of his assets to his brother, Todd Thicke. But Todd had the option to decline, which he took, and that gave Thicke’s sons, co-trustees Brennan and Robin, control.
Thicke allegedly left his three children equal shares of a Carpinteria ranch, 75% of his personal effects and 60% of his remaining estate. He left his wife Tanya Callau the ranch’s furnishings, 25% of his personal effects, $500,000 in a life insurance policy, all benefits from his various pensions and union memberships, along with 40% of his remaining estate. Alan also allowed for her to continue to live on the ranch, provided she’s able to reasonably maintain the property.
However, Tanya is now claiming that this agreement violates the terms of their initial prenuptial agreement.
The sons say Tanya didn’t dispute the terms in February, but now she has changed her posture with Alan gone. She claims the prenup she signed won’t be held valid. Instead, she’s seeking an arrangement that looks more like that to which she previously thought she was entitled.
In the petition, the sons’ attorney even suggested that Callau threatened to share details of this family squabble with the press, but her lawyer denies that claim.
Callau’s attorney, Adam Streisand, disputed this, speaking with a reporter from show biz’s Variety. He claims that she has repeatedly tried to get Thicke’s sons and other family members together for a mediation, which they have declined to do.
Reference: Fox News (May 17, 2017) “Alan Thicke's sons in legal battle with his widow over his estate”
With the cost of a college education continuing to rise exponentially, opening a 529 for a grandchild is generous gift. You’ll be able to save for your grandchild’s future, get some good tax breaks and maintain control over the account, according to a recent article appearing on nj.com, “529 plan funding for a grandchild. ” The earnings are tax-free, as long as the funds are used for educational expenses.
The recipient grandchild won’t have control over the account or when distributions are made, and the owner can change the beneficiary of the account to a different member of the beneficiary's family at any time. This can be crucial if the account’s overfunded or not used by the grandchild. The definition of family member is quite broad and includes cousins and spouses of family members. In the event that you need the funds yourself, you could take a distribution.
If you did take a distribution, there’d be a tax owed and a 10% penalty on the earnings portion of the withdrawal since it wouldn’t be used for qualified education expenses. This gives grandparents some safety, if they need access to those funds.
The grandparent owner can also use 529 plan contributions as part of his or her estate plan, because it removes funds from the grandparent’s taxable estate. The contribution is considered a gift subject to the federal gift tax, but there’s an annual gift tax exclusion. It’s currently $14,000 per beneficiary per year, which is not subject to the gift tax.
Some grandparents will also front-load a lump sum of up to five times the annual exclusion amount to each beneficiary. They must then wait five years before any gifts to that same beneficiary would be eligible for the exclusion. Even if the gifts go over the exclusion amount, there is a lifetime exemption amount, which is currently $5.49 million dollars.
Some states don’t have a gift tax on lifetime transfers, but there are those that have an estate tax on estates valued in excess of a specific amount (usually less that the federal limit), which should be taken into account when estate planning.
It is important to be aware that you may already have estate planning in effect using the annual gift tax exclusion, with a life insurance trust or family limited partnership as part of your plan. If you’re thinking that someday you may need Medicaid assistance, your state will probably deem any 529 accounts you own to be your own assets. As a result, you’d have to deplete them before qualifying.
Finally, when your grandkids start looking at colleges, make sure to talk about these accounts with your kids. The 529 accounts –including those owned by family members—will be considered as assets belonging to the grandchildren for purposes of determining how much financial aid the school will offer.
Reference: nj.com (May 12, 2017) “529 plan funding for a grandchild”
Given to the movie star Elizabeth Taylor by her husband Richard Burton on the occasion of her 40th birthday, the heart shaped diamond known as the “Taj Mahal” was one of many incredible pieces in a large collection of art and jewelry sold by the Christie’s auction house. The entire collection sold for $183.5 million. Taylor died in 2011.
Variety reported in a recent article, “Elizabeth Taylor’s Estate Sues Christie’s Again Over ‘Taj Mahal’ Diamond,” that the diamond was sold to an anonymous bidder for $8 million. A few months later, the buyer requested that the sale be cancelled. This was apparently upon hearing that there was some question whether it was, in fact, owned by Shah Jahan, the 17th century emperor who built the Taj Mahal.
Christie’s acted to rescind the sale. However, the trust that oversees Taylor’s estate would not return the proceeds, claiming that the auction house was not obliged to cancel the sale. It never guaranteed that the emperor owned the diamond.
The trust argues that Christie’s was instead doing a favor for the buyer, who was one of their best clients. In addition, Taylor’s trust alleges that Christie’s failed to turn over proceeds from the $2.9 million sale of a Bulgari ring in an attempt to leverage this to get the trust to refund the sale of the diamond.
The trust filed a lawsuit over the issue in federal court in 2015. However, the parties suspended the litigation to opt for mediation.
“Both parties believe the other owes them money as a result of the auction,” Christie’s said in a statement. “We have been discussing this matter for some time. The Trust apparently decided to cease discussions and instead pursued legal action without notice. Christie’s believes it is unfortunate that this issue cannot be resolved through mediation, especially given the success of the sale held for the Trust’s benefit.”
The trust alleges that payments for several other items that were sold at auction have also not been paid to the trust. These include equally upscale and movie-star quality possessions that include a pink layered tulle evening grown, a Valentino evening bag and Girandole ear clips.
Reference: Variety (May 11, 2017) “Elizabeth Taylor’s Estate Sues Christie’s Again Over ‘Taj Mahal’ Diamond”
Once you hit the mark at 70 ½, it’s time to start taking the RMDs from retirement accounts. This can send you into a higher income level. One way to manage this: make a tax-free transfer from an IRA to charity and have that count as the RMD. We know what your first question is going to be: why don’t I just take the money out and make a charitable donation? There’s more to it than you might think.
According to a recent Kiplinger article, “The Advantages of a Tax-Free Transfer From an IRA to Charity,” if you itemize, the tax deduction will appear to be identical. But let’s take a closer look.
The transfer is deemed to be a qualified charitable distribution, which keeps your required minimum distribution outside of your adjusted gross income. This can help you remain under the income cut-off for some other taxes and charges. In addition, for those who don't itemize their deductions, making the tax-free transfer can benefit from their charitable gift.
If you are required to take large RMDs from your retirement savings, you could be lifted into a higher premium level for Medicare. However, making a tax-free transfer of that RMD to charity keeps that sum out of the Medicare premiums calculation. If your AGI plus tax-exempt interest income is more than $85,000 for singles or $170,000 if married filing jointly, you'll have to pay higher Medicare Part B premiums. That could be a substantial difference: the monthly premiums of about $109 per month for most people who have their premiums deducted from their Social Security payments or $134 for new Medicare enrollees. Those subject to the high-income surcharge must pay from $187 to $428 per month for Medicare Part B in 2017, depending on their income—plus an extra $13 to $76 added to their premiums for their Part D prescription-drug coverage.
A lower AGI can also help you lower taxes on your Social Security benefits. You need to look at your provisional income, which is your adjusted gross income, not counting Social Security benefits, plus nontaxable interest and half of your Social Security benefits. If your "provisional income" is less than $25,000 and you file taxes as single or head of household—or less than $32,000 if you file a joint return—you won't owe taxes on your Social Security.
If you’re single and your provisional income is between $25,000 and $34,000—or between $32,000 and $44,000 if married filing jointly—up to 50% of your benefits may be taxable. If it’s more than $34,000 if single or more than $44,000 if married filing jointly, 85% of your Social Security benefits could be taxable. Keeping your RMD out of your AGI can help reduce your provisional income.
Here’s a key point to keep in mind: if you are over 70 ½, you are permitted to transfer as much as $100,000 tax free from your IRA to a non-profit. But—and this is very important—the funds must be transferred directly from your IRA to the non-profit, if they are to stay out of your AGI. An estate planning attorney who is knowledgeable about tax law will be your best source of help.
Reference: Kiplinger (May 12, 2017) “The Advantages of a Tax-Free Transfer From an IRA to Charity”
The days when Americans worked for a single company for a lifetime and received a guaranteed pension for life are long gone. The burden of managing and maximizing retirement funds is now squarely on the shoulders of the employee themselves. Instead of a pension, employees have retirement accounts, typically 401(k)s.
A recent Kiplinger article asks, “Why Wait Until You Retire to Take Control of Your 401(k)?”
The main benefit of a 401(k) is the potential for a company match. Companies let their employees contribute up to a certain percentage each month, which is matched by the company. However, 401(k)s are also limited in investment options and there are internal costs that many people pay on their accounts.
It’s extremely important to create a plan for your own retirement. Part of this is to take control of your retirement accounts, so your savings are working optimally for your future.
When you’re in your 30s and 40s and are working and saving money, you have both time and earning capabilities. If the market takes a hit, you’ll have income coming in and time to make up the losses. But when you’re in your 50s and early 60s, you can’t afford a big hit on your investments. You don’t have time or earning capabilities on your side. Therefore, you must take a hard look your money and make decisions to begin eliminating risk from your portfolio.
If you’re 59½ years old and still working, you can roll money over from your 401(k) into an IRA—it’s called an in-service rollover. There are no income restrictions and only some very minimal fees. Here are a few reasons why you should consider an in-service rollover:
With no guarantees, it’s critical that employees be financially savvy about managing their retirement accounts and making informed strategic decisions to achieve a comfortable and successful retirement.
Reference: Kiplinger (May 2017) “Why Wait Until You Retire to Take Control of Your 401(k)?”
Vadim Tevelev may be a hero to those who retain his services to prove kinship for Surrogate’s Court cases. However, according to the New York Daily News, there are serious questions about the documents and genealogical records that he has provided in many cases.
The article, “Genealogist who helps heirs obtain fortunes in estate cases accused of using forged documents,” reports that Tevelev is working on behalf of a Russian-born New Jersey woman to win her part of an $8 million fortune left behind by Isaac Kramer, a Brooklyn lawyer who died in 2008 at the age of 94. However, some estate lawyers and genealogy experts have said that the family trees and genealogical records Tevelev submits as proof of kinship are not always 100% real.
A court-appointed lawyer reviewing the case said that the Ukrainian birth records Tevelev submitted were probably fakes. Roger Olson wrote in his report for a Brooklyn Surrogate’s Court judge that Tevelev has been involved in other cases where genealogical records were called into question.
Tevelev currently represents Elizabeth Hovav. He says Hovav is Kramer’s first cousin once removed and is entitled to some of the decedent’s estate. As in other estate cases, he has power of attorney for Hovav and her interest in the estate. If he’s successful in proving kinship, he typically receives a commission of one-third of the inheritance. However, Hovav and 36 other alleged relatives of Kramer have battled in the courts over the estate for almost nine years. The attorneys for the other Kramer relatives also question the validity of the documents that Tevelev has submitted over the years.
Olson obtained a 2013 report by the public prosecutor’s office in Lviv, Ukraine, which said a civil servant had pleaded guilty to forging records that showed Hovav’s mother was born in Lviv and to falsifying the identities of Hovav’s grandparents. Hovav’s mother was actually from St. Petersburg, Russia. The public prosecutor’s report also says the forgeries were made for unidentified people to get money from Kramer’s estate.
Tevelev also submitted records from the central archive of Russia’s federal security service that said Hovav’s grandparents were arrested in 1947 and executed. However, Olson reported that he obtained a letter from the federal security service that showed it had no records of Hovav’s grandparents and had never provided such a document.
Tevelev’s attorney said that Ukraine’s National Police Department later conducted its own investigation into the civil servant’s alleged forgery in 2016 and decided that no crime had occurred. But the police also said that evidence in the case had been lost because of the 2014 riots in Ukraine.
Tevelev, who lives in New Jersey, but was born in Russia, said he’s been an “heir hunter” since 1991. He said he considered himself a specialist in foreign documents and locating people overseas.
Tevelev and Hovav are still likely to get significant payouts from the Kramer estate, no matter how accurate Olson’s report is. The attorneys for all of the alleged relatives involved in this matter have requested that a judge let them reach a settlement among themselves. They have apparently chosen to overlook the issue of forgery altogether. According to court filings, one possible deal being examined would give Hovav as much as $300,000.
Reference: New York Daily News (May 15, 2017) “Genealogist who helps heirs obtain fortunes in estate cases accused of using forged documents”
Did you know that estate planning includes naming guardians for minor children in the event that both of their parents die before the children become of legal age? Most people don’t understand that when tragedy strikes and there is no will, guardianship is assigned by the court and not by trusted family members.
Estate planning isn’t just a topic for older people. It’s for young families with children, often the least prepared and most vulnerable in the absence of a will.
Planning your estate doesn’t mean you must have significant assets. Even if you are making a decent living, you still need to protect your family's future, like your home equity and your family's ability to maintain their lifestyle if you are gone. This requires you to take some simple steps now to avoid long and costly probate court proceedings.
The Chicago Tribune’s article, “5 essential steps of estate planning,” lists some things you should be doing now, before things get complicated.
Make decisions on who gets what. Create a list of your assets, how you want them distributed and the names of the person(s) appointed to carry out your wishes.
Visit a local estate planning attorney and do it correctly. This is not a do-it-yourself project with documents found online. If you make a mistake, you won't be around to correct it by the time it is discovered. Instead, engage an experienced estate planning attorney.
Learn about your estate plan options. Talk with your attorney about a will or a revocable living trust. A will must go through probate before assets can be distributed. If you create a revocable living trust, name yourself as trustee while you are alive and capable. If you pass away or become incapacitated, you have a successor trustee to take over so that he or she won’t have to go to probate court to be empowered to carry out your written instructions. With a trust, you must re-title your assets in the name of your trust.
Look at your health care issues. You never know if illness will take away your ability to make decisions. Select a trusted friend or family member to be your healthcare power of attorney. You should also make a living will to express your thoughts on any treatment required to prolong your life, as well as your desires for organ donation.
Think about your funeral wishes. Write these instructions down and place them in a spot where they can be found before your will is read. This usually takes place after the funeral is held.
Finally, don’t leave the process in mid-stream. Documents need to be signed and trust accounts need to be funded. If there are changes made to property ownership, titles need to be updated. You should also remember to tell key family members where documents are located and to provide contact information for your estate planning attorney. Making this easier for your surviving family members will be appreciated and remembered long after you are gone.
Reference: Chicago Tribune (May 8, 2017) “5 essential steps of estate planning”