Worcester & Middlesex County Estate Planning & Elder Law

Do You Know If Your Heirs Will Get What You Intended?

We all want to assure that, after we’re gone, our assets go to the loved ones we intend—in the ways, amounts, and proportions we intend—without unintended consequences.

MD Magazine’s recent article, "Making Sure Your Heirs Get What You Intend," says that for many people, most of their asset value is held in accounts such as 401(k) plans, Individual Retirement Accounts (IRAs), annuities, and pensions. These accounts require the designation of beneficiaries for the assets.

It’s not uncommon after a few years for a person to forget which beneficiaries they specified for a life insurance policy or pension. Perhaps it’s a first spouse and they’ve now remarried. There’s no “do-over” after you’re gone, which can lead to considerable confusion and stress. It will also ultimately disappoint your intended heirs.

In addition, based on whether and how some other assets are designated in estate planning documents, some states may send the matter to probate. This can be a long, expensive process, since if the estate plan was done right in the first place, it wouldn’t be needed.

To be certain the heirs you intend inherit the assets you intend, remember these points:

• Keep track of the beneficiaries you’ve designated for your accounts. If you don’t recall, check with these institutions.
• Don’t rely on cookie-cutter, one-size-fits-all estate planning products. Get a custom plan from an experienced estate planning attorney, even though it may cost a little bit more money.
• Regularly review the beneficiary designations on your financial accounts and those in your will to be sure they’re in sync and current.

Some people think they are required to create a trust for estate planning, when a well-drafted will and clear beneficiary designations will suffice. Talk to your attorney to determine if a trust is a good idea for your specific situation. The primary reason in some cases to have a trust is potential incapacitation.  Therefore, a trust can empower heirs to manage your estate without first going to court to get a conservatorship, which can be time-consuming and costly.

A trust can also be way to manage your estate “from the grave.” A trustee is appointed to assure that assets are distributed according to specified instructions. This can be a good way to make sure heirs with dependency issues don’t burn through their inheritance quickly or spend it on the wrong things. Trusts can also be a smart way to ensure the care of a disabled relative.

Reference: MD Magazine (July 25, 2018) "Making Sure Your Heirs Get What You Intend"

The best way to avoid any issues with beneficiary designations, wills, or trusts is to work with a qualified estate planning attorney to design a customized strategy. Give us a call at (978) 342-1914 or visit us at www.dellamonaca.com.

Questions About New Military Blended Retirement System

Service members who joined the armed forces in recent years must decide whether to stay in the military’s old retirement system or join the new one. Here’s how to choose the system that’s best for you.

As the year winds down, questions are popping up about the new military blended retirement system, when a person needs to decide whether to switch to the new system and how to determine which plan is better.

Kiplinger’s recent article, "The Big Pension Decision Military Service Members Must Make in 2018," explains that if you joined the military from 2006 through 2017, then you have from January 1 to December 31, 2018, to decide whether to switch to the new “blended retirement system.”

If you do nothing, you’ll continue to be covered under the old plan. Those who join the military after January 1, 2018, will be enrolled in the new system automatically, while those who entered the military before 2006 remain in the old system.

The current military retirement system provides a generous pension. It starts at 50 percent of your base pay every year for life if you stay in the service for 20 years or up to 75 percent if you remain for 30 years. However, if you leave the military before 20 years, you get nothing. About 80 percent of all service members don’t stay long enough to collect a pension.

Contrast this with the new system, which reduces the pension to 40 percent of your base pay if you stay for 20 years or 60 percent if you stay for 30 years. However, you’ll also get an automatic contribution of 1 percent of your base pay to the federal Thrift Savings Plan after 60 days of service, and matching contributions for the next 4 percent of your pay (which you can keep after two years of service). Those who joined the military before 2018 can keep the matching contributions right away without waiting for two years. The matching contributions continue for up to 26 years of service.

Even if a person doesn’t plan to stay in the military for 20 years, they’ll come out ahead with the new system. A person who may stay to make his “20” should compare payouts under the old and new system, and calculate how much he’ll need to save in the TSP to make up the difference.

USAA has a calculator for active-duty service members and members of the Reserves and National Guard. The Defense Department’s Blended Retirement System guide also has more information. Members of the Reserves are eligible for the new plan based on the retirement points they have earned—see the Department of Defense’s Reserve Component fact sheet for more information.

Reference: Kiplinger (November 10, 2017) "The Big Pension Decision Military Service Members Must Make in 2018"

Need help sorting it all out? Give us a call at (978) 342-1914 or visit us at www.dellamonaca.com. 

Where's My Pension?

Think you're owed a pension, but no check is in the mail? Here's how to track down your benefits.

Those lucky enough to have earned a defined-benefit pension are in a great position. This allows them to retire with a steady income stream for life. However, it's no dream when the promised benefits don't appear. And an investigation by the U.S. Department of Labor says that many retirees aren't getting the benefits they've earned. The plans the government has looked at thus far owe more than $500 million to retirees.

Kiplinger's article, "Missing Pensions Costly to Retirees," reports that since last summer the Labor Department has investigated more than 48 large pension plans and has found staggering results: Some of them are not doing a very good job of monitoring retired participants and paying benefits when they're owed. Some plans don't even have the names or ages of many of their participants.

Poor recordkeeping is one thing. Corporate mergers, spinoffs, and bankruptcies also make it difficult for retirees to track down and claim pensions from employers they left years ago. In light of this unfortunate reality, plan members must maintain employment records, plan documents, tax returns, and other paperwork that show they're eligible for a pension. Plus, they must be proactive in claiming their benefits when the time arrives. These plans don't have much motivation to pay benefits when they're due.

If you've earned a pension, hang on to your individual benefit statements and the summary plan description that outlines the requirements for earning benefits. Also, keep your records of employment—including W-2 forms and pay stubs—as well as all of your old tax returns. When you claim your benefits, the plan might say that it's already paid you a distribution, so you'll need your old tax returns to show if that's accurate.

In the event you leave a job before the plan's retirement age, make certain that you have a vested benefit and get the plan's most recent summary plan description. This will tell you the benefits you get in retirement. Update the plan for any changes in your contact info and marital status. If your plan is terminating, make sure you know who's going to be administering the plan. If the plan is sufficiently funded, an insurance company will take over payment of the benefits. If not, the plan will likely be turned over to the Pension Benefit Guaranty Corp.

If you lose track of a pension, go to https://www.pensionhelp.org to find pension counseling projects funded by the U.S. Administration on Aging. Look at your old W-2 to find your former company's employer identification number (EIN)—that can help you find the company. Look for a "notice of potential private pension benefits." This is a reminder from the Social Security Administration to those who've earned a private pension. Plans turned over to the PBGC may be found at www.pbgc.gov/wr or click "find an unclaimed pension" at the site to find out if your name is on the PBGC's list of missing participants. If you've been omitted from your plan's records, you have to document your work history and eligibility for the benefit. If you lack W-2s and other employment documentation, you can get a Social Security earnings statement using Form SSA-7050 for $136.

Reference: Kiplinger's (June 2016) "Missing Pensions Costly to Retirees"

Need help with your retirement planning? Give us a call at (978) 342-1914 or visit us at www.dellamonaca.com.