Estate Planning and Trusts Blog

New Income Tax Form Designed for Seniors

IRS Form 1040
The IRS has created a new Form 1040 for seniors.

There’s a new tax form designed with seniors in mind. The IRS released a draft form of the 1040-SR, “U.S. Tax Return for Seniors,” says Kiplinger in its article, “IRS Releases Draft Form of New 1040 Tailored for Seniors.”

This form was created by the 2018 Bipartisan Budget Act. One of its provisions required the development of a tax return that would be easy for seniors to use. The form will highlight retirement income streams and other tax benefits for seniors. Taxpayers age 65 and older can use this form to file their 2019 tax returns.

It’s designed off the regular 1040, and the IRS says it uses all the same schedules, instructions, and attachments. Taxpayers who use tax software to file may not even notice the difference.

However, for taxpayers who still complete paper tax forms, the new form will be friendlier to aging eyes. The font is bigger, and the shading on the regular 1040 has been removed to improve the contrast and increase legibility.

One important feature of the new tax form is the addition of a standard deduction chart. The form lists the standard deduction amounts, including the extra standard deduction amount for which taxpayers age 65 and older qualify. This way, seniors don’t have to search around for the information. The chart also makes it simpler for seniors to take advantage of the full standard deduction for which they’re eligible, especially for those who may not even be aware of the extra amount for which they qualify.

The tax form has lines for specific retirement income streams, like Social Security benefits, IRA distributions, and pensions, as well as earned income from work.

The draft form will be finalized later this year.

Reference: Kiplinger (July 12, 2019) “IRS Releases Draft Form of New 1040 Tailored for Seniors”

Other articles you may find interesting:

Filing Estate Taxes for a Deceased Family Member

Who Should Be the Agent of My Power of Attorney?

Becoming Your Aging Loved One’s Money Manager

money managers help others with their finances
Before a loved one is showing the beginning symptoms of cognitive decline, make sure the necessary legal documents are in place so you can easily step in as his money manager.

Sometimes a loved one starts having trouble managing her money because of confusion, cognitive decline, Alzheimer’s disease, or some other form of dementia. When that happens, you might find yourself having to serve as her money manager. Here are some things you need to know about handling your aging loved one’s finances.

Changes to Make Now

Your loved one must be legally competent to take certain steps, such as adding a trusted friend or relative to a bank account or creating a power of attorney so her chosen money manager can  handle her financial matters. Once your aging loved one becomes incapacitated, she will not be able to hand the reins over to someone else. So plan ahead, before the confusion or dementia really sets in.

At that point, the only option is to go to court and obtain a guardianship or conservatorship. This legal process can take weeks, months, or even longer, and they often cost your aging loved one thousands of dollars in legal fees. Not only does she have to pay for the lawyer who files and handles the guardianship for you, she also has to foot the bill for court costs and payment to the person the court appoints to represent her.

People often challenge changes to legal documents that a person makes after a certain age, or while in the early stages of Alzheimer’s. The best way to counter this situation is to get a letter from your loved one’s doctor at the same time she decides to execute a power of attorney or add you to her bank account. The doctor’s letter should say your relative was of sound mind at that time.

How to Avoid Elder Financial Abuse

Sadly, the vast majority of people who steal from older adults are the people they trust the most. Family members, friends, clergy and financial professionals commit the lion’s share of elder financial abuse. To prevent this outcome for your loved one, you have two options:

  • Have two people in charge of your loved one’s finances instead of only one. The two people can alternate the responsibility monthly or quarterly. This arrangement provides automatic oversight of each person’s actions. You could, for example, have a close relative and a dear friend serve as the two money managers.
  • Use a money management service. These companies can take care of things like paying the bills and balancing the checkbook for your aging relative. You should have a relative or friend go over the reports from the company every month to check for fraud on the part of the company. Your local National Association of Area Agencies on Aging can provide names of money management programs in your area.

When a money manager starts handling your loved one’s finances, she should prevent identity theft and fraud by canceling and shredding your relative’s debit cards and credit cards. She should also close the accounts at PayPal and other online shopping services.

Keep All Transactions Above Suspicion

Because incapacitated people are so vulnerable to theft and fraud, the people who manage your loved one’s money and other assets should take precautionary measures to make it clear they are acting in your relative’s best interests. Always write the reason for the payment on the memo line of the check. And never co-mingle funds.

Do not borrow from the account. Do not use your loved one’s assets for purchases that benefit anyone other than your relative. Do not use her assets for your own benefit, like driving her car to work.

Every state has different regulations, so talk with an estate planning or elder law attorney near you.


AARP. “Managing a Loved One’s Money.” (accessed July 11, 2019)

Other articles you may find interesting:

Why is an Advance Directive so Important with Dementia?

Are Your Estate Planning Documents Age-Appropriate? (Part 1)

How Much Money Should I Provide My Child with Special Needs?

A child with special needs
It can be hard to determine how much money you should leave for the care of your child with special needs, but the first step is to create some sort of a plan.

One of the toughest things about planning for a child with special needs is trying to calculate the amount of money it’s going to take to provide while the parents are alive and after the parents pass away.

Kiplinger’s recent article asks “How Much Should Go into Your Special Needs Trust?” The article explains that it’s not uncommon for parents to have done some estate planning, but not necessarily special needs estate planning. They haven’t thought about how much money they should earmark to fund their child’s trust or which assets would be the best to use.

Special needs estate planning often involves creating a type of trust which will allow a person with a disability to continue to receive certain public benefits while avoiding complete impoverishment. Typically, ownership of assets more than $2,000 would make the individual ineligible for certain public benefits. But assets held in a special needs trust (SNT) don’t count toward this amount.

A child with special needs can generate a lot of expenses over his or her lifetime. The precise amount will be based on the needs and lifestyle of your family, as well as your child’s capabilities. When you die, this budget must be increased because the things you did for free must now be paid for.

An SNT often isn’t funded until the parents’ death. At that point, the trust would file a tax return each year and pay taxes at the higher trust tax rates. There are also legal and trust administration expenses to think about. But the public program benefits your child receives can, in many cases, offset many of the above-mentioned costs.

It’s vital to conduct a complete analysis of the future costs of providing for your child with special needs so you can start saving and making adjustments in your financial and estate planning. The Kiplinger article provides some great information about how to start thinking about the realities of your child’s future needs.

Speak with an elder law or estate planning attorney about the different types of special needs trusts.

Reference: Kiplinger (June 10, 2019) “How Much Should Go into Your Special Needs Trust?”

Other articles you may find interesting:

ABLE Accounts: No More Medicaid Recovery

Special Needs, Special Trusts: SNT FAQs

Who Should Be the Agent of My Power of Attorney?

power of attorney - person to act on your behalf
Choose the agent you name in your power of attorney carefully. You should trust her to act in your best interests at all times.

It’s important to understand what a power of attorney is, how it factors into estate planning, and how sibling roles can differ and be shared at the same time.

Considerable’s recent article, “How to assign power of attorney without sparking a family feud,” gives us some idea how the power of attorney can work within a family and among siblings.

A power of attorney (POA) is a legal document that allows one person (the agent) to act on behalf of another (the principal), usually when that person is unable to make decisions for themselves. It’s probably the most important estate planning document an adult should have as it’s the only way to avoid guardianship court.

Many people confuse the role of the agent of a power of attorney with the role of the executor of an estate. A power of attorney is only in effect while the person who has granted the authority is alive. Once that person dies, that document terminates and the executor of the estate assumes the responsibility of seeing the estate through the probate process. They’re two very different roles, but they can be held by the same person.

There are also different types of powers of attorney. The most frequently used are the general POA and the health care POA (known in Florida as a Designation of Health Care Surrogate). The general power of attorney is for the management of financial, business, legal, and private affairs. The health care power of attorney authorizes the agent to make health care-related decisions for the principal.

If a parent grants a power of attorney to one of her children, that child has the sole authority to act on behalf of the parent. The other siblings have to abide by the inherent authority of that sibling to make decisions for the parent. Additionally, the sibling named as sole agent has no legal obligation to report to the other siblings or to request their input when making decisions.

It’s also important to understand that the power of attorney is a fiduciary obligation. This means the person who holds it must act in the best interests of the principal rather than in their own interests. He or she must also comply with the state laws and the directions within the legal document. Nonetheless, things can get messy if there isn’t transparency and trust among the siblings when major decisions are being made.

Some parents opt to appoint joint agents on their power of attorney so that two siblings share the responsibility. This may decrease the potential for jealousy and mistrust within the family. However, it can also lengthen and complicate decision-making. There’s always the possibility that the siblings simply won’t agree on an issue, and as a result, an important decision could remain stuck in neutral indefinitely.

Whether one or more people are named as agents on a power of attorney, communication and transparency are the key factors in avoiding painful situations in the family. Another alternative is to name an independent person or professional fiduciary to act as the agent. That may be the best way to prevent family conflict and provide peace of mind when a parent needs help managing his or her affairs.

Reference: Considerable (July 10, 2019) “How to assign power of attorney without sparking a family feud”

Other articles you may find interesting:

Naming a Child as Successor Trustee?

Why is an Advance Directive so Important with Dementia?

Change Your Life Insurance Beneficiary After Divorce

update your beneficiary designations
Review and update your beneficiary designations to avoid unintended consequences.

Many surviving spouses receive an unpleasant surprise when they attempt to collect on their deceased spouse’s life insurance policies. Often, a former spouse or the former spouse’s children are legally entitled to the proceeds because the deceased person never updated his beneficiary forms.

In Florida, this accidental (or negligent) result was addressed in 2012 with a new statute. Basically, it says that if the beneficiary designation was made before the divorce, the former spouse is treated as having predeceased the policy owner. But that doesn’t always solve the problem, and may even create other problems.

If the primary beneficiary predeceases the policy owner, then the contingent beneficiaries (perhaps the former spouse’s children) will receive the proceeds. That may not sit well if the deceased policy owner also had children with his current spouse. Or, if no contingent beneficiaries were named, the proceeds will likely be paid to the deceased person’s estate. Hello, probate.

Also, our state law is preempted by federal law. Many federal and military group life insurance policies pay proceeds only to the beneficiaries named on the last form the company received from the deceased policy owner, regardless of marital status or state law. The U.S. Supreme Court upheld this treatment in 2013 in Hillman v. Maretta.

Protect your family. Review your beneficiary designations on your life insurance policies at work and at home annually, or at the very least, any time you have a life change: marriage, divorce, deaths, and births/adoptions. Keep a copy of all current signed beneficiary designations in your files with the rest of your estate planning documents. Your family will thank you.

Other articles you may find interesting:

You’ve Received an Inheritance. Now What?

Widowed? What Happens Next?

Using a Trust for Your Children’s Inheritance Plan

Inheritance by young children
An inheritance held in trust can help your children learn the value of money.

Planning for your children’s inheritance takes some thought. Young people tend to like to keep things simple. Millennials don’t want their parents’ furniture or antiques. They want to be able to move easily, without a lot of headaches. Millennials are okay with jewelry, art, and cash. Likewise, with estate planning, millennials want a simple Will. This can be a wise choice if they have no children and are under the estate tax threshold. However, when they have children of their own, they should consider a trust.

Forbes’s recent article, “Why A Simple Will Won’t Cut It If You Have Young Children,” explains that without a trust, minor children inherit assets outright when they turn 18. That may be a problem if your children are apt to blow through their inheritance in a few years instead of using the money wisely.

However, an inheritance could last a lifetime if the beneficiary lives within her means, doesn’t tap into the principal, and works to help support her lifestyle and supplement her income. However, this isn’t always the case, and individuals with access to so much cash are often vulnerable to developing addictions.

A trustee can make certain that your children and young adults are cared for over the long-term. If you’re not alive to guide and direct your children, a trust can set the necessary limitations for their finances. The trustee can also help with your children’s financial literacy, so they’ll possess tools if and when they’re given additional responsibility for their inherited assets.

This isn’t just for minor children who are under 18 years old but also for young adults. The fact that a child is “legal” in the eyes of the law doesn’t mean she’s responsible enough to invest a million-dollar inheritance. A trust sets up an experienced advisor to manage inherited assets along the way.

One option is to set up the trust so they will become a co-trustee at a certain age. This lets them have a say and learn to make decisions about the management of the trust assets. Your trust can also give them access to distributions of principal slowly over time so they get used to managing large sums of money.

Simple solutions can work for some people, and there are definitely situations in which a simple Will is appropriate. But if you have minor children, consider doing additional planning so they don’t inherit money at 18.

Ask your estate planning attorney about the options available to set up a trust to work for your family.

Reference: Forbes (July 12, 2019) “Why A Simple Will Won’t Cut It If You Have Young Children”

Other articles you may find interesting:

Understanding Your Trust Document

Why Unmarried Couples Need Estate Planning

Including Pets in Your Estate Plan

Pet trusts can be for horses.
Pet trusts aren’t just for dogs and cats; horses, parrots, and other animals may also benefit.

Estate planning helps to create a strategy for managing our assets while we are living and preparing for their distribution when we die. That includes determining what happens to our tangible property as well as financial investments, retirement accounts, etc. An estate plan can also be used to protect the well-being of our beloved companion animals, says The Balance in the article “Estate Planning for Fido: How to Set Up a Pet Trust.”

Pet trusts were once thought of as something only for extremely wealthy or eccentric individuals, but today many ‘regular’ people use them to ensure that if they die before their pets, their pets will have a secure future.

Every state (except for Washington) and the District of Columbia now has laws governing the creation and use of pet trusts. Knowing how they work and what they can and cannot do will be helpful if you are considering having a pet trust as part of your estate plan.

When you set up a trust, you are the “grantor.” You have the authority as creator of the trust to direct how you want the assets in the trust to be managed – for yourself and any beneficiaries of the trust. The same principal holds true for pet trusts. You set up the trust and name a trustee. The trustee oversees the money and any other assets placed in the trust for the pet’s benefit. Those funds are to be used to pay the pet’s caregiver for the pet’s care and related expenses. These expenses can include:

  • Regular care by a veterinarian,
  • Emergency veterinarian care,
  • Grooming, and
  • Feeding and boarding costs.

A pet trust can also be used to provide directions for end of life care and treatment for pets, as well as burial or cremation arrangements you may want for your pet.

In most instances, the pet trust, once established, remains in place for the entire life span of the pet. Some states, however, place a time limit on how long such a trust can continue. For animals with very long lives, like certain birds or horses, you’ll want to be sure the trust will be created to last for the entire life span of your pet. In several states, the limit is 21 years.

An estate planning attorney who has experience with pet trusts will know the laws of your state.

Creating a pet trust is like creating any other type of trust. An estate planning attorney can help with drafting the documents, helping you select a trustee and if you’re worried about your pet outliving the first trustee, naming any successor trustees.

Here are some things to consider when setting up your pet’s trust:

  • What’s your pet’s current standard of living and care?
  • What kind of care do you expect the pet’s new caregiver to offer?
  • Who do you want to be the pet’s caregiver, and who should be the successor caregivers?
  • How often should the caregiver report on the pet’s status to the trustee?
  • How long do you expect the pet to live?
  • How likely your pet is to develop a serious illness?
  • How much money do you think your pet’s caregiver will need to cover all pet-related expenses?
  • What should happen to the money, if any remains in the pet trust, after the pet passes away?

The last item is important if you don’t want the funds to disappear. You might want to give the money to family members, or you may want to give it to charity. The pet trust needs to include a contingency plan for these scenarios.

Another point: think about when you want the pet trust to go into effect. You may not expect to become incapacitated, but these things do happen. Your trust can be designed to become effective if you become incapacitated.

Make sure the pet trust clearly identifies your pet so no one can abuse its terms and access trust funds fraudulently. One way to do this is to have your pet microchipped and record the chip number in the pet information document. You should also include photos of your pet and a physical description.

Be as specific as necessary when creating the document. If there are certain types of foods that you use, list them. If there are regular routines that your pet is comfortable with and that you’d like the caregiver to continue, then detail them. The more information you can provide, the more likely it will be that your pet will continue to live as they did when you were taking care of them.

Finally, make sure that your estate planning attorney, the trustee and the pet’s designated caregiver all have a copy of your pet trust so they are certain to follow your wishes.

Reference: The Balance (March 27, 2019) “Estate Planning for Fido: How to Set Up a Pet Trust”

Other articles you may find interesting:

Pet Trust FAQs: For the Love of Fluffy

Smart Second Marriage Planning Tips

You’ve Received an Inheritance. Now What?

A big inheritance
Receiving an inheritance means you should take a breath and do some planning before you do some spending.

Inheriting money puts a whole new spin on your outlook on money, says The Kansas City Star in its article “Coming into some money? Be wise with it.”

Should you pay off your debts first, if you have any? Maybe. Make a list of your debt balances and their interest rates. If the interest rate is high, pay it off. If it’s low, you may be better off investing the funds.

Next, check on your emergency fund. If you don’t have three to six months’ worth of living expenses on hand, use your inheritance to ramp up that fund. Yes, you can use credit cards sometimes. However, having at least two months’ worth of living expenses in cash is smart.

The third step is to contribute the most you can to a health savings account (HSA), if your employer does not contribute to it and if you have a qualifying health plan. That’s $3,500 if you are single, $7,000 for families, and you can add another $1,000 if you are over 55. This gets you a nice tax deduction and withdrawals are tax-free as long as they are used for qualified medical expenses.

Depending upon the size of the inheritance, if you’re still working it might be time to “tax-shift” your portfolio.

Let’s say you regularly contribute $3,000 to a 401(k). If you can, increase that amount by $22,000, to the maximum, if you’re 50 and older. Since your paycheck decreases, so does your tax. If your tax rate is currently 22%, you’ll only need to add $17,160 from your inherited account to reach the same spendable dollars. The tax-deferred account in your portfolio will grow faster, while the taxable account shrinks.

Think about whether to commingle funds with your significant other or not. Let’s say you and your spouse have a retirement portfolio. You both can spend it now, maybe on your house. The inheritance may also help you to retire earlier. If you save the inheritance, keep it in a separate account with only your name on it so it remains your separate asset in case of a divorce. Most states will consider this money a non-marital asset, and not subject to division between divorcing parties.

Consider using the inheritance as a way to avoiding tapping into retirement accounts. Withdrawals from IRAs are taxable. If you’re not worried about commingling funds or investment gains, then use the inherited account to minimize the tax losses from retirement accounts.

Most people don’t have enough savings put aside that will allow them to maintain the same amount of spending during retirement as they did while working. Skip the spending spree that often follows an inheritance and enjoy the money over an extended period of time.

Your new financial position may require more tax planning and more legacy planning. Receiving an inheritance is one of the times when reviewing your estate plan becomes a wise move.

Reference: The Kansas City Star (June 27, 2019) “Coming into some money? Be wise with it”

Other articles that may interest you:

How Do Transfer on Death Accounts Work?

How Can a Collector Leave a Legacy?

Actor Robert De Niro’s Bad Prenup

Robert De Niro & Grace Hightower
Robert De Niro and Grace Hightower’s prenup is at the center of their divorce.

Wealth Advisor’s recent article, “Robert De Niro Prenup Breakdown Can Rock NYC Real Estate (And $500M Dynasty),” says that Oscar-winning actor Robert De Niro is estimated to be worth $300 million and with a $400 million Queens real estate development partnership with his son Raphael, there’s plenty more money.

Grace Hightower has been with De Niro one way or another since 1987. They were married 10 years later, almost split in 1999, and then reconciled five years later. A big issue in their current divorce is the lack of a firm prenuptial contract (prenup) protecting De Niro’s fortune.

When the couple got back together, the terms were that she would get $500,000 in cash, along with what it would take to buy her out of the marital home. She’d also get an apartment, then valued at $6 million, as well as $1 million a year in upkeep. However, unfortunately for De Niro, the contract also apparently confirmed in writing that everything he made after the prenup was executed was a partnership, 50-50.

A good prenuptial contract should be reviewed, just like an estate plan. If it’s out of date, it should be modified to something more current and defensible. The actor may have only been worth $100 million when the prenup was written. Now that he’s tripled that net worth, the numbers no longer add up the same way.

Meanwhile, De Niro is in deep trying to renovate an entire neighborhood into a Hollywood-style film production hub. Purchasing the land is costing close to $75 million. And it’s not all his money. His son Raphael (from a previous marriage) is a high-powered real estate broker lining up venture investors and adding his own funds to the project. If Grace wants $50 million or even $10 million now, De Niro and his son could have a problem. To comply with the prenup, he may have to allow Grace to participate in the new project instead of giving her cash. Or he may have to borrow or liquidate properties to come up with cash.

A good prenup  – or regular reviews – could have avoided all of this.

Reference: Wealth Advisor (June 24, 2019) “Robert De Niro Prenup Breakdown Can Rock NYC Real Estate (And $500M Dynasty)”

Other articles you may find interesting:

Angelina Jolie Leaving Her Estate to One Child?

Billionaire Conrad Prebys’s Son Gets $15M after Being Disinherited

Smart Second Marriage Planning Tips

second marriage can cause family discord
Second marriages can cause family feuds if careful planning isn’t done.

Forbes’s recent article, “6 Second Marriage Planning Tips For You And Your Significant Other Before Walking Down The Aisle,” says it’s wise to squeeze some reality into your romance.

That begins with good communication, a skill that’s important in every marriage.

You should begin this conversation long before setting a date to say, “I do.” Let’s look at some tips for making sure your next marriage gets off on the right financial foot:

Be open. Talk frankly and openly about your plans and obligations to any children and former spouses. Talk about your credit history, assets, debts and any financial support you must provide.

Look at your property. Review the assets that each of you will bring into the marriage and discuss how they ultimately will be used or bequeathed.

Update your accounts. Be sure that all your records are up to date when you remarry.

Sign a prenup. This isn’t just to protect the assets of the wealthier spouse. It can be important if you both already have established careers, children, or significant assets. A prenup lets you decide together, and in advance, which assets you’ll share and which you’ll keep separate in the event of divorce or death.

Work with an estate planning attorney. He or she will help you update your estate planning documents, retitle your investments, and modify any beneficiaries on retirement, life insurance, and annuity accounts. Since the probate laws aren’t typically designed for blended families, special estate planning may be needed, especially if you or your new spouse have children and grandchildren from previous marriages.

Without an appropriate estate plan, some or all of your assets will likely pass to your current spouse and then to his or her children – not yours – if you die first.

But some smart second marriage planning may avoid feuding, bitter feelings, and big legal expenses among your survivors.

Reference: Forbes (June 20, 2019) “6 Second Marriage Planning Tips For You And Your Significant Other Before Walking Down The Aisle”

Other articles you may find interesting:

Does Having a Will Avoid Probate?

A Basic Form Doesn’t Work for Estate Planning