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J.S. Burton Blog

Monday, April 25, 2016

Avoiding Bankruptcy as a Senior Citizen

Senior Citizens Comprise Growing Demographic of Bankruptcy Filers

It’s called your “golden years” but for many seniors and baby boomers, there is no gold and retirement savings are too often insufficient to maintain even basic living standards of retirees. However, baby boomers are the fastest growing age group filing for bankruptcy. And even for those who have not yet filed for bankruptcy, a lack of retirement savings greatly troubles many who face their final years with fear and uncertainty.

Another study, conducted by Financial Engines revealed that nearly half of all baby boomers fear they will be in the poor house after retirement. Adding insult to injury, this anxiety also discourages many from taking the necessary steps to establish and implement a clear, workable financial plan. So instead, they find themselves with mounting credit card debt, and a shortfall when it comes time to pay the bills.

In fact, one in every four baby boomers have depleted their savings during the recession and nearly half face the prospect of running out of money after they retire. With the depletion of their savings, many seniors are resorting to the use of credit cards to maintain their standard of living.  This is further exacerbated by skyrocketing medical costs, and the desire to lend a helping hand to adult children, many of whom are also under financial distress.  These circumstances have led to a dramatic increase in the number of senior citizens finding themselves in financial trouble and turning to the bankruptcy courts for relief.

Whether filing for bankruptcy relief under a Chapter 7 liquidation, or a Chapter 13 reorganization, senior citizens face their own hurdles. Unlike many younger filers, senior citizens tend to have more equity in their homes, and less opportunity to increase their incomes. The lack of well-paying job prospects severely limits older Americans’ ability to re-establish themselves financially following a bankruptcy, especially since their income sources are typically fixed while their expenses continue to increase.


Wednesday, April 20, 2016

The Effect on Taxes of a Lifetime of Giving

What are the tax implications of giving gifts to family members during your lifetime?

If you have substantial assets, it is natural to want to gift your family members from time to time, on special occasions, or to subsidize a particular purchase, trip, start-up business or educational venture. Nonetheless, it is important to be savvy about the tax implications of giving such gifts.

How do lifetime gifts affect your taxes?

Gifts given during your lifetime can affect your taxes on three levels:

  • Your individual income taxes
  • Your individual estate and gift taxes
  • Capital gains taxes potentially paid by the recipient

Current federal law considers estate and gift taxes in combination. You are allowed a cumulative $5.45 million exemption ($10.
Read more . . .

Monday, April 18, 2016

Fired for Having Bad Credit???

Can You Be Fired for Having Bad Credit?

If you are feeling the pinch, you are not alone. Many Americans have experienced a decline in income, while expenses have continued to increase. Many have taken a significant hit to their credit scores and are considering bankruptcy. Others who are on the eve of foreclosure may be considering a bankruptcy filing to stop an imminent foreclosure sale.

Whatever the reasons, a common concern of many consumers who face mounting debt, or are considering filing bankruptcy, is whether such credit issues can affect their ability to obtain or keep a job or get a promotion. In short, no. Bankruptcy is a protected, fundamental right granted by the U.S. Congress to all Americans. Under federal law, employers are prohibited from discriminating against a worker because of a bankruptcy filing. Bankruptcy courts across the country have weighed in on this issue and have consistently upheld the anti-discrimination protections contained in the U.S. Bankruptcy Code.

Employees who have filed bankruptcy and are subsequently fired must prove that bankruptcy was the primary factor in the termination. If the employer can prove there were other reasons for the termination, the employee’s wrongful termination claim will fail. Similarly, it is a violation of the law to refuse to hire or fail to promote an employee solely on the basis of a bankruptcy filing.

Monday, April 11, 2016

Gifting to Grandchildren? Issues to Consider...

Issues to Consider When Gifting to Grandchildren

Many grandparents who are financially stable love the idea of making gifts to their grandchildren. However, they are usually not aware of the many issues related to what many consider to be a simple gift. If you are considering making a significant gift to a grandchild, you should consult with a qualified attorney to guide you through the legal and tax issues that are involved.

Making a Lifetime Gift or a Bequest:  Before making a gift, you should consider whether you want to make the gift during your lifetime or leave the gift in your will. If you make the gift as a bequest in your will, you will not experience the joy of seeing your grandchild’s appreciation and use of the gift. However, there’s always the possibility that you will need the money to live on during your lifetime, and in reality, once a gift is made it cannot be taken back. Also, if you anticipate needing Medicaid or other government programs to pay for a nursing home or other benefits at some point in your life, any gifts you make in the prior five years can be considered as part of your assets when determining your eligibility.

What Form Gift Should Take:  You may consider making a gift outright to a grandchild. However, once such a gift is made, you give up control over how the funds can be used. If your grandchild decides to purchase a brand-new sports car or take an extravagant vacation, you will have no legal right to stop the grandchild. The grandchild’s parents could also in some cases access the money without your approval.

You could consider making a gift under the Uniform Gift to Minors Act (UGMA) or the Uniform Transfer to Minors Act (UTMA), depending on which state you live in. The accounts are easy to open, but once the grandchild reaches the age of majority, he or she will have unfettered access to the funds. You could also consider depositing money into a 529 plan, which is specifically designed for education purposes. Finally, you could consider establishing a trust with an estate planning attorney, which can be more expensive to set up, but can be customized to fit your needs. Such a trust can provide for spendthrift, divorce and creditor protection while allowing for more flexibility for expenditures such as education or purchase of a first home.

Tax Consequences: If you have a large estate, giving gifts to grandchildren may be a great way to get money out of your estate in order to reduce your future estate tax liability. In 2016, a single person can pass $5.45 million at death free of estate tax, and a couple can pass a combined $10 million without paying estate taxes. In addition, a person can give $14,000 in 2016 to any number of individuals without incurring any gift taxes. A grandparent with 10 grandchildren could give $140,000 per year to all grandchildren (and a married couple could give $280,000), thereby removing that property from his or her estate.

Monday, April 4, 2016

Making COLA Increase Permanent for Veterans

How are cost-of-living increases determined for veterans who receive VA benefits?

Veterans who receive benefits such as disability compensation, payouts for dependants and other Veterans Affairs living allowances typically receive Cost-of-Living Adjustments (COLA) annually, much as the recipients of Social Security benefits do. While COLA benefits for the latter group are automatic, recipients of veterans' benefits depend on intervention by Congress each year to approve cost-of-living increases.

What is a Cost-of-Living Adjustment (COLA)?

A Cost-of-Living Adjustment is an annual increase to Social Security, Supplemental Security Income, and VA Benefits to offset the effects of inflation. These increases are pegged to the percentage increases in the Read more . . .

Friday, March 18, 2016

Don't Be Conned into Buying an Unnecessary Living Trust

How are con artists selling seniors unnecessary living trusts?

While a living trust can be an important tool in estate planning, it is not useful in all cases. A living trust serves as a substitute for a will, but, unlike a will, is not subject to probate. The advantages of this are that it is a more private document than a will and is less prone to being contested.

For whom are living trusts inappropriate?

As mentioned, living trusts are not always helpful. They are particularly inappropriate for senior citizens living on fixed incomes with limited assets. Nonetheless, there has been a recent increase in scam artists preying on the elderly by selling Living Trust Kits as if they were essential. These frauds are rounding up seniors by the boatload -- through public seminars and by phone, mail, and door-to-door solicitation -- in order to exploit their trust and naiveté.  In this way, too many unsuspecting seniors have been sold estate planning tools that they do not require and can ill afford.

Beware of High-Pressure Tactics

Scammers of all kinds use similar tactics. In this case, where seniors are the targets, the con artists typically approach their victims with teasers they believe will focus on the latter's vulnerabilities, such as:

  • Gifts
  • Companionship and friendship
  • Scare tactics exaggerating death taxes and legal fees

By convincing the seniors they victimize that they (the scam artists) are their friends and will protect them from passing financial hardship onto their inheritors, the unscrupulous sellers rob vulnerable seniors of what few assets they have.

According to the 2015 True Link Report on Elder Financial Abuse, this kind of exploitation is costing U.S. seniors $17 billion annually, since every $20 loss adds to an approximate annual loss of at least $2,000. This is because once scammers gain a senior's trust, they most often manipulate the victim into further financial missteps, such as purchasing additional annuities or unnecessary insurance policies.

How To Protect Yourself from Financial Scammers

In addition to being generally alert and wary of anyone who seems very friendly but is trying to sell you something, you can protect yourself from scam artists by:

  • Never signing any document that you don't fully understand
  • Not yielding to overly "friendly" gestures, such as gifts or repeated phone calls
  • Not giving in to the pressure of time-limited offers
  • Checking out any supposed affiliations to familiar organizations or government agencies (AARP for example, does not endorse any company that sells living trusts)
  • Be aware of your right under the Federal Trade Commission's "Cooling Off Rule" to cancel any purchase within 3 days if it was made anywhere but in the seller's permanent place of business

It is always wise to do your estate planning with an experienced, reputable estate planning attorney. Resisting the temptation of solicitations of fly-by-night unknown salespeople will keep you safe and protect your assets.

Monday, February 22, 2016

Why Trusts Should Be Part of Your Financial Plan

What type of tax and estate planning benefits do trusts offer?

Whether you already have an estate plan or are just now creating one, you may want to consider how helpful trusts can be in achieving your goals.

 What is a trust? Simply put, it is a contract between you and a trustee, a person whom you appoint to manage and distribute your wealth as you instruct. Laws in virtually every jurisdiction require trustees to respect the terms of the trust. People at all income levels can benefit from some of the advantages trusts offer.

Avoiding Probate

Probate is a time-consuming process in which a court affirms the validity of your will. It can leave assets in limbo while your heirs wait for estate planning lawyers and the courts to plod through legal procedures. Assets placed in trust, however, can avoid probate.

Just like a will, a trust lets you specify who receives your assets and when. It can be a "revocable trust," meaning that you can continue to control the assets and change your mind up until your death. Additionally, if there are aspects of your estate that you would like to keep private, a trust can help you to do so. A will, on the other hand, may become public as part of probate.

Retaining Control

Instead of simply handing off wealth, trusts ensure that your legacy is handled in the manner you choose. You can choose a trustee to manage and distribute the wealth according to terms you set. You can provide safeguards to protect children who are not yet ready to handle wealth, and you can safeguard assets in the event of a divorce. Trusts can also shield assets from creditors.

Tax Benefits

"Irrevocable" trusts remove assets from your estate, potentially reducing or eliminating estate taxes. Some trusts, such as so-called Grantor Retained Annuity Trusts (GRATs) allow you to hold onto principal while giving away only future appreciation of your assets, reducing estate taxes on those gains while preserving your peace of mind.

Varieties of Trusts

There are many types of trusts, such as life insurance trusts or charitable trusts, each established to accomplish a different set of goals and each offering different advantages. Some can be a win-win financially, offering tax benefits now and more wealth for your family later. 

The advantages of trusts should not be overlooked. An estate planning attorney or financial advisor can help you determine how a trust may fit into your financial plan and help you maximize your estate and your legacy.

Friday, February 19, 2016

Long-term Care Protection Alternatives

Can hybrid life insurance help to pay the costs of long-term care?

Long-term care insurance is designed to cover a wide range of services for care of the elderly, including personal and custodial care in a variety of settings, such an individual's home, a community organization, or other facility. These insurance policies reimburse policyholders for certain amounts of services to assist them with daily activities such as bathing, dressing, or eating.  

The cost for long-term insurance is based on a number of factors, including:

  • A person's age at the time the policy is purchased
  • The maximum amount that a policy will pay per day
  • The length of time (days or years) that a policy will pay

Currently, the cost of long-term care insurance is becoming more expensive. Moreover, many consumers may not qualify for such insurance, depending on their age and any pre-existing health conditions. In light of these situations, one alternative is so-called "hybrid" life insurance policies.

What is a hybrid life insurance policy?

Hybrid policies are essentially life insurance policies with a long-term care rider, or additional coverage that can be added to an existing policy. Some common riders include the accidental death rider, the guaranteed insurability rider, the waiver of premium rider, and the family income benefit rider.

Do I need a long-term care rider?

Hybrid life insurance policies are well-suited for individuals in their later 40s to early 70s who are concerned about rising long-term care costs as well as protecting the value of their estates. These policies are also more cost-effective than traditional, stand-alone long-term care insurance. However, a long-term care rider cannot be added after life insurance has been purchased.

Who is eligible for hybrid life insurance?

In order to qualify for hybrid life insurance, an individual will need to undergo a medical exam and insurers may also require copies of medical records and physician statements. Ultimately a long-term care rider will provide assistance in the event of an illness or injury that prevents an individual from performing daily activities like eating or bathing.

In the end, there are limits to how much protection long-term care insurance and hybrid life insurance can provide. If care is needed for an extended period of time, the policy could be depleted and other assets may be needed to pay for long-term care. The best way to protect the assets of an estate and ensure for long-term care is to consult with a qualified estate planning and elder care attorney.


Friday, January 29, 2016

Estate Planning: Not Something You Should Put Off

What are the risks of waiting to create an estate plan?

It is a common belief that estate planning is only for the elderly, terminally ill and very wealthy.  However, everyone can benefit from a well-drafted estate plan, regardless of his or her age, health or socioeconomic status. Failing to have an estate plan can expose an individual to a number of risks. While nobody wants to think about death, or the possibility of becoming disabled or incapacitated. Unfortunately, incapacity happens more frequently than people realize.  With people living longer the chances of becoming incapacitated have increased significantly.  Therefore, a well designed estate plan will take this into account.  Without the appropriate estate planning documents, such as a durable power of attorney and advanced medical directives such as a  living will for example an individual’s wishes will not be followed or worse, will be totally unknown. 

Another problem with waiting to create, or totally foregoing, an estate plan, is that it will make it much less likely that the wishes you have relating to after your death will be followed.  Whether you want your assets distributed in a certain way, you want a particular send off or you desire a particular guardian for your children, without an estate plan it is unlikely that these wishes will be fulfilled.  This is because without a will the law of your state will dictate how these matters will be handled.  These laws do not take into account the deceased’s desires.

If you have particular wishes about how your matters relating to the end of your life or the time after your death are handled, it is best to have an estate plan so that your wishes are carried out.  An experienced trusts, estates and elder law attorney can help you put together a comprehensive plan.

Thursday, January 28, 2016

Planning for Long-Term Care: An Often Ignored Imperative

What do most Americans need that few have? A sound plan for long-term care.

The majority of Americans will, at some point, find themselves temporarily bed-ridden or disabled because of illness or injury. Some may be unable to care for themselves for an extended period of time. Even the healthiest could find themselves in need of long-term care, particularly in old age.

Unfortunately, a recent survey shows that most people—73% of those questioned—have no awareness of the true cost of long-term care. Even worse, only 22% think they will ever need it. In reality, as many as 70% of today's 65-year olds will need long-term care in the future.

Because they do not appreciate the risk and expense involved, few Americans have made adequate plans, nor have they discussed the issues with a legal or financial advisor. And yet, while conversations about illness and disability are unpleasant, they are essential. It is critical to consider risks well in advance and find a strategy that will work, if and when the time comes.

Some of the options available include:

  • Long-Term Care Insurance
  • "Hybrid" products combining a long-term-care insurance with a life insurance policy or annuity
  • Medicaid
  • Self-funding

Long-term care insurance can be costly, and not everyone is eligible to purchase it. Plans may contain exceptions and waiting periods and usually do not cover all expenses. Still, they provide a financial cushion. Hybrid plans may offer more flexibility and accomplish other financial objectives. Either could be a valuable part of a long-term contingency plan.

Medicaid is a way to fund long-term care, but with major disadvantages. Recipients must spend down all assets before Medicaid benefits become available and must give up control over their care. The location and quality of care may not be to their liking.

"Self-funding" is an option many choose—or wind up with for lack of planning. To pay for your care out of your savings, you will need a substantial amount of wealth on tap. You will most likely also need a family member to help with caregiving and coordination of your nursing and medical treatment, unless you hire a professional care manager, whose services can be costly. A family member who assists will have to make large sacrifices of time, potentially jeopardizing his or her own career and financial stability.

The first stage of planning for long-term care is to have a serious discussion with your professional advisors. You can discuss your level of risk, your possible funding solutions, and the steps you need to take now and down the road. A skilled elder law attorney can help you find an approach that ensures your future well-being and protects your assets.


Monday, December 21, 2015

Estate Planning With Your Family In Mind

Are there any specific estate planning techniques that will make it easier to keep my money in the family?

The purpose of estate planning is to ensure that your assets go to the people of your choice after you die. It is not surprising that many people want to leave their money to family members.  It is so common that intestacy statutes across the country make this presumption. If you are seeking to keep your money in the family, the best thing you can do is create a comprehensive estate plan.

Components of a Well-Drafted Plan.

Although intestacy laws (the laws that would govern your estate should you die without a will) presume that most people want to leave their assets to members of their family, these laws are not always specific enough to accomplish a person’s goals. These laws designate beneficiaries based on their degree of relation to you and this might not be how you would like your estate to be distributed. Therefore, it is imperative to create a Will. This allows you to be as specific as you would like in your bequests.

A Will is a great way to make arrangements as to how your assets will be distributed, but, beneficiary designations and certain retirement and other financial accounts also make it easy to name who you would like the money in these accounts to go to. In such cases, the money is passed to the intended recipient without the need for probate (the process of validating a Will), which will save your heirs time and money. You should check your designations and keep them up to date. Most attorneys recommend reviewing them after each major life event, such as marriage, death or childbirth.

If you are striving to keep as much money as you can in the family, you should strongly consider establishing a trust. By transferring assets into a trust you can shield them from certain taxes.  This allows you to leave more to your family in the long run. These estate planning tools also offer a great deal of flexibility in how assets will be managed during your lifetime and how your assets will be distributed after your death.

Another technique that allows you to ensure that your family members get your money is simply to gift it to them while you are alive. You are legally allowed to give any one person up to $14,000 a year ($28,000 if your spouse joins in the gift).  This can allow you to spend down your estate so you do not pay taxes and also allows you to see how your money is being spent.

If you are considering estate planning, you need an experienced estate planning attorney by your side.  

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477 Viking Drive, Suite 410 , Virginia Beach, VA 23452 | Phone: 757.301.9500
5425 Discovery Park Blvd., Suite 101, Williamsburg, VA 23188 | Phone: 757.301.9500
750 Tysons Blvd., Suite 1500, McLean, VA 22102 (By Appointment Only) | Phone: 757.301.9500