By Danielle and Andy Mayoras

Whitney Houston’s funeral this weekend provided the first public glimpse of what may be trouble involving her estate. Her ex-husband, Bobby Brown, was invited to the funeral, after reports surfaced that some family members didn’t want him there. He didn’t last long. Brown’s entourage wasn’t allowed to sit with him at the funeral.  Brown wasn’t happy and left, visibly upset.

Bobby Brown issued a statement after the funeral, saying he and his group were asked to relocate three times and, rather than making a scene, he chose to pay his respects quickly and leave.

TMZ reported the day before the funeral that Whitney’s mother, Cissy Houston, and other family members had been trying to keep Brown away from Bobbi Kristina, Whitney’s daughter with Brown. They were said to be worried that Brown would try to use Bobbi Kristina to make a play for some of Whitney’s money.

Brown’s statement confirmed some of this. He said that security prevented him from seeing his daughter at the funeral. Is money the reason why? Brown tried to get some of Whitney’s money through a court proceeding in 2007, just after their divorce judgment was entered, but he failed.

Some have speculated that Whitney’s estate will be worth between $10 and $20 million, or more. At this point, that’s pure speculation. As we wrote a few weeks ago, Whitney’s camp previously denied rumors that she was broke.

Certainly, between the royalties from increased record sales, and with prudent marketing of her name and image, her estate can bring in millions. But, because Whitney Houston only sang songs, instead of writing or producing them like Michael Jackson did, her estate won’t have the same earning potential.

Here’s an ABC News article that discusses her estate’s earning potential in more depth. The article quotes an unnamed source familiar with the situation who indicated that Whitney did have a will and that the estate process has been started. At this point, we don’t know how much estate planning she had in place. But, certainly, we can expect there will be millions of dollars at stake.

We hope that Whitney Houston’s estate planning included more than just a simple will. For the large majority of people with even a modest amount of assets, a will is not enough. Whitney Houston’s passing provides a perfect illustration of why this is true.

With a basic will alone, Whitney’s beneficiaries would generally receive their inheritances outright. Everyone expects that Whitney left most — and perhaps all — of her assets to her daughter Bobbi Kristina. Because Bobbi Kristina is 18, she would be entitled to receive everything at once under a simple will.

How many 18-year-olds do you know who are responsible enough to handle a large sum of money?  Not many. And, again according to TMZ, there may be more concerns about Bobbi Kristina’s responsibility. Reportedly, family members want her to undergo drug rehab right away, because she has been struggling with substance abuse issues for years— much like her mother did.

If this is true, and if Bobbi Kristina is a beneficiary under a simple will, then this report raises a big concern. If she is controlled by drug abuse, Bobbi Kristina might not be competent to handle the money. If that’s the case, then family members could go to court, try to have her declared legally incompetent to manage her finances, and seek a conservatorship over her.

Who would have standing to do this? Bobby Brown for one. It could be the legal avenue he may try to use to seek control of the money, which is what Whitney’s mother and other family members are reportedly afraid of.

Think this won’t happen? Look at the Britney Spears case. Her father filed for conservatorship over her in 2008 due to her out-of-control behavior caused by substance abuse, and she is still subject to it, even though she’s turned her life around and is engaged to be married. As we’ve written before, in Britney’s case, that process may have actually saved her life, but that did come at a cost to Britney’s personal freedom in many respects. You can read more about that case here.

Will Bobby Brown try something similar? He could. At least, if Whitney Houston only had a basic will.

If Whitney Houston did the right estate planning, by using a trust, this result could be avoided. Unlike a will which passes through probate court, a trust is handled privately, outside of court, when used properly.

Trusts normally have provisions to spell out what each beneficiary would inherit, and when and how. Usually, young adults don’t receive money under a trust, until they reach a certain age. Often trusts spell out that the beneficiaries’ money is to be managed by a trustee and used for their benefit, for things like education, health and living expenses, but not given directly to them to control and spend.

In fact, trusts can be even more creative, such as those with drug and alcohol language that requires beneficiaries to be “clean” before they receive their money.

Did Whitney properly protect Bobbi Kristina with a trust? Is there an opening for Bobby Brown to cause trouble? We will likely find out in the weeks to come. Certainly, there are enough reports, justified by what happened at the funeral over the weekend, to create serious cause for concern.

It’s a lesson for everyone. No one knows when tragedy may strike. For most people, having a simple will is not enough. A properly-funded trust, with detailed distribution provisions specifically tailored for your beneficiaries, based on your client’s wishes, is the best way for your clients to protect their loved ones after you pass.

Too many people — the rich and famous, and not-so-rich-or-famous alike — fail to do the proper estate planning, and it’s the family members left behind who pay the price.

_______________

By Danielle and Andy Mayoras, co-authors of Trial & Heirs: Famous Fortune Fights!, husband-and-wife legacy expert attorneys, and hosts of the national television special, Trial & Heirs:  Protect Your Family Fortune! For the latest celebrity and high-profile cases, with tips to protect yourself, your loved ones, and your clients, click here to subscribe to The Trial & Heirs Update.  You can “like” them on Facebook and follow them on Twitter.

Description

Finding the middle ground between being “insurance poor” and unprotected requires assessing real needs and choosing products that are affordable. This article introduces different types of insurance products and the role that they can play in a personal financial plan.

Synopsis:

Death is one of things that no one likes to talk about. Yet, protecting loved ones from the financial consequences of death is one step you can take to gain peace of mind for you and your loved ones. And this is where life insurance enters the picture.

If you have a family or spouse who depend on you for financial support, or if you work at home providing your family with such services as child care, cooking, and cleaning, then you need life insurance. Older couples also may need life insurance to protect a surviving spouse against the possibility of the couple’s retirement savings being depleted by unexpected medical expenses. And individuals with substantial assets may need life insurance to help reduce the effects of estate taxes or to transfer wealth to future generations.

Determining what type of insurance depends on your goals, while deciding on an appropriate amount of coverage requires an assessment of your needs. Some approaches use a formula based on your income, while others factor in future liabilities, such as mortgage debt, college expenses, and estate taxes. The bottom line is quite simple: Don’t go it alone. Enlist the services of a qualified life insurance professional to help you determine the type and scope of coverage that best suits your financial objectives.

Key Points

• Types of Insurance
• Key Terms and Definitions
• How Much Insurance Do I Need?
• Other Types of Life Insurance
• Conclusion
• Points to Remember

Conventional wisdom says that life insurance is sold, not purchased. In other words, some people are reluctant to discuss the importance of owning life insurance, and others are simply unaware of the need to have life insurance. Although many large companies provide life insurance as part of their benefits package, this coverage may be insufficient.

Who needs life insurance? If there are individuals who depend on you for financial support, or if you work at home providing your family with such services as child care, cooking, and cleaning, you need life insurance. Older couples also may need life insurance to protect a surviving spouse against the possibility of the couple’s retirement savings being depleted by unexpected medical expenses. And individuals with substantial assets may need life insurance to help reduce the effects of estate taxes or to transfer wealth to future generations.

Types of Insurance

Term insurance is the most basic, and generally least expensive, form of life insurance for people under age 50. A term policy is written for a specific period of time, typically 1 to 10 years, and may be renewable at the end of each term. Also, the premiums increase at the end of each term and can become prohibitively expensive for older individuals. A level term policy locks in the annual premium for periods of up to 30 years.

Declining Balance Term insurance, a variation on this theme, is often used as mortgage insurance since it can be written to match the amortization of your mortgage principal. While the premium stays constant over the term, the face value steadily declines. Once the mortgage is paid off, the insurance is no longer needed and the policy expires. Unlike many other policies, term insurance has no cash value. In this sense, it is “pure” insurance without any investment options. Benefits are paid only if you die during the policy’s term. After the term ends, your coverage expires unless you choose to renew the policy. When buying term insurance, you might look for a policy that is renewable up to age 70 and convertible to permanent insurance without a medical exam.

Whole Life combines permanent protection with a savings component. As long as you continue to pay the premiums, you are able to lock in coverage at a level premium rate. Part of that premium accrues as cash value. As the policy gains value, you may be able to borrow up to 90% of your policy’s cash value tax-free, although loans reduce the policy’s death benefit and cash value, and may trigger a taxable event if the policy lapses.

Universal Life is similar to whole life with the added benefit of potentially higher earnings on the savings component. Universal life policies are also highly flexible in regard to premiums and face value. Premiums can be increased, decreased or deferred, and cash values can be withdrawn. You may also have the option to change face values. Universal life policies typically offer a guaranteed return on cash value. You’ll receive an annual statement that details cash value, total protection, earnings, and fees.

Drawbacks to this type of insurance include higher fees and interest rate sensitivity. Universal policies include up-front fees as well as ongoing administrative fees totaling as high as 5% to 7% of your premiums. You may also find your premiums increasing when interest rates decline.

Variable Life generally offers fixed premiums and control over your policy’s cash value. Your cash value is invested in your choice of stock, bond, or money market funding options.¹ Cash values and death benefits can rise and fall based on the performance of your investment choices. Although death benefits usually have a floor, there is no guarantee on cash values. Fees for these policies may be higher than for universal life, and investment options can be volatile. On the plus side, capital gains and other investment earnings accrue tax deferred as long as the funds remain invested in the insurance contract.

Universal Variable Life insurance is the most aggressive type of policy. Like variable life, you can choose from a variety of investment options. However, there are no guarantees on universal variable policies beyond the original face value death benefit. These policies are probably best suited to affluent buyers who can afford the risks involved.

How Much Insurance Do I Need?

A popular approach to buying insurance is based on income replacement. In this approach, a formula of between five and ten times your annual salary is often used to calculate how much coverage you need. Another approach is to purchase insurance based on your individual needs and preferences. The first step is to determine your unique income replacement needs.

Currently, a large portion of your income goes to taxes (insurance benefits are generally income tax free) and to support your own lifestyle. Start off by determining your net earnings after taxes. Then add up all your personal expenses such as housing, health care, food, clothing, transportation expenses, etc. This represents the amount that your insurance will need to replace. You’ll want a death benefit amount which, when invested, will provide income annually to cover this amount. Then, you should add to that the amounts needed to fund one-time expenses such as college tuition for your children or paying down mortgage or debt.

Income replacement for nonworking spouses is an important and often overlooked insurance need. Coverage should provide for your costs for day care, housekeeping, or nursing care. Add to this any net earnings from part-time employment.

Finally, estimate your own “final expenses” such as estate taxes, uninsured medical costs, and funeral costs.

Other Types of Life Insurance

Survivorship life insurance (also referred to as last-to-die or second-to-die) is a unique type of contract that insures the lives of two people. It pays a death benefit upon the death of the second insured. Therefore, it is typically less expensive than two individual policies. Survivorship life is often used for estate planning, where it may be possible to potentially leverage today’s dollars — via insurance premiums — into a potentially significant death benefit that can be used to fund estate taxes, create wealth for future generations, or benefit a charity. These policies may be available if one insured is medically “uninsurable.”

First-to-die life insurance insures the life of at least two people and pays a benefit upon the death of the first insured. This policy is useful for covering a mortgage or other large debt obligation where there is more than one debtor. In addition, it can be an ideal tool for funding a buy-sell agreement within a closely held business.

Conclusion

Life insurance is an important component of a sound financial plan. Buying insurance involves asking a variety of personal lifestyle and financial questions. If you are not already working with an insurance professional, you may want to consider the advice of a fee-for-service financial planner who can offer you an objective review of your insurance options. When you decide on what you want, there are many insurance companies to choose from. Consult your library or an independent insurance professional for companies with the highest ratings from the four ratings agencies: AM Best, Duff Phelps, Standard & Poor’s, and Moody’s.

Points to Remember

• Term insurance is basic, inexpensive coverage that does not accumulate cash value. Policies with very long terms offer stable premiums, but policies that require periodic renewal feature premiums that may increase over time to maintain coverage.
• Consider a term policy that is renewable and convertible to whole life should your needs change.
• Whole life provides level coverage with level premiums. A portion of those premiums goes into tax-deferred savings.
• Variable life offers control over your investments.
• Premiums on variable policies are fixed, but face value and the value of your investments can fluctuate.
• Universal life is highly flexible, but is sensitive to interest rate changes. Universal variable life offers more investment options but fewer guarantees.
• Insurance needs are based on income replacement and personal preferences.

Source/Disclaimer:

¹An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund.

February 2012 — This column is provided through the Financial Planning Association, the membership organization for the financial planning community, and is brought to you by Martin V. Higgins, CFP, CLU, AEP, a local member of FPA.

Because of the possibility of human or mechanical error by McGraw-Hill Financial Communications or its sources, neither McGraw-Hill Financial Communications nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall McGraw-Hill Financial Communications be liable for any indirect, special or consequential damages in connection with subscriber’s or others’ use of the content.
© 2012 McGraw-Hill Financial Communications. All rights reserved.

No matter how many mistakes you make or how slow you progress, you are still way ahead of everyone who isn’t trying!
If you start implementing these seven habits today, you will see a positive change in your life within a week’s time, guaranteed.

1.  Choose happiness with words.

Happiness is simply a state of mind.  No, I’m not implying that we can instantly heal the pain of a severe or unexpected personal tragedy just by thinking about being happy.  Rather, I am referring to our levels of happiness on routine days when things in our lives are close to normal.  In these neutral times, when we are neither ecstatic nor extremely sad, the slightest change in attitude can swing our happiness balance drastically in either a positive or negative direction. One of the primary factors that affect our attitude is our choice of words.

Words have a lot of power and influence on both the speaker and the listener.  When we speak we sometimes unintentionally choose words that have a negative undertone.  This can make us seem unhappy (and negative) in the eyes of others.  Even worse, after we have spoken these words our unconscious mind starts believing in them.  “If this is what came out of my mouth, it must be the way I truly feel.”

However, this is not always true.  The first fleeting words that come to mind are not necessarily the most accurate representation of our feelings and intentions.  We must realize that we have the power to choose the words we use, and if we pick them carefully, they can change the way we feel.  Here’s one example:

Typically, when I ask someone “How are you?” they reply, “I’m fine” or “I’m okay.”  But one lazy Monday afternoon last month a new colleague of mine replied, “Oh, I am fabulous!”  It made me smile, so I asked him what was making him feel so fabulous and he said, “I’m healthy, my family is healthy, and we live in a free country.  So I don’t have any reason not to be happy.”  The difference was simply his attitude and his choice of words.  He wasn’t necessarily any better off than anyone else, but he seemed twenty times happier.

It really struck a chord with me.  Suddenly I realized that I have a choice.  I can either say “the glass is half empty” or “the glass is half full.”  Why not rejoice in the fact that, thankfully, I don’t have anything to be terribly upset about.

So now when someone asks me how I am doing, I say “I’m doing wonderful!” or “Everything is awesome!” or something similar that reflects a positive, happy mood.  Since I’ve made a regular habit of doing this, multiple friends and acquaintances have noticed a positive change in my attitude.  And I do genuinely feel happier.  Also, it seems like the people around me are smiling more now too.  So I guess it’s contagious.

2.  Get uncomfortable and try new things.

Brian Tracy once said, “Move out of your comfort zone.  You can only grow if you are willing to feel awkward and uncomfortable when you try something new.”  One of the biggest reasons people get stuck in an idle state, instead of taking action to change their lives for the better, is simply that the process is uncomfortable.  But to create positive changes in your life you have to step outside your comfort zone, at least for a little while.

Rather than dismissing yourself as unchangeable creature of habit, you can instead direct your own change by consciously developing new habits.  In fact, the more new things you try – the more you step outside your comfort zone – the more inherently creative you will become, both in the workplace and in your personal life.

Routines stagnate us.  New experiences help us grow and they make life interesting.  Make an effort to try something new every day this week.  It can be a whole new activity or just a small experience, such as talking to a stranger.  And once you get the ball rolling, many of these new experiences will open doors to life changing opportunities.

With a strategy of continuous small steps into new experiences, we are able to sidestep the biggest barrier to positive change:  Fear.  Read The Success Principles.

3.  Help someone in a way only you can.

We all have natural strengths and talents that can dramatically help those around us.  What comes easy for you is no doubt challenging for others.  We tend to take these gifts for granted, often hardly noticing what we have to offer, and thus we rarely share them with others.  Inner happiness and zeal come from using these inherent gifts on a routine basis.

Ask yourself, “What do people thank me for?”  What do people routinely ask for your help with?  Most people’s passions and talents help others in one way or another.  Perhaps for you it’s painting, teaching math, cooking a good meal or leading an exercise class.  Devote time each day to sharing your talents.

4.  Dedicate time to activities you’re passionate about.

Take part in something you passionately believe in.  This could be anything.  Some people take an active role in their city council, some find refuge in religious faith, some join social clubs supporting causes they believe in and others find passion in their hobbies.  In each case the psychological outcome is the same.  They engage themselves in something they strongly believe in.  This engagement brings happiness and meaning into their lives.

The same principals hold true for your job and career.  Why should you be passionate about what you do for a living?  Because diligent focus alone is not enough to make you successful and happy.  Focus is important, but what happens when the path you’ve taken is more difficult or longer than you anticipated?  That’s where passion comes in.

Not only can working on things you’re passionate about be immediately gratifying, but passion can keep you from quitting when you feel like there’s no end in sight.  Passion can help you enjoy the road to your destination enough that you don’t have to only rely on your focus to drive you.  Passion will change your life by pushing you forward through even the toughest of times.  Read The How of Happiness.

5.  Make small, positive changes every day.

How do you eat an elephant?  One bite at a time.  The same philosophy holds true for making changes in your life.  Making small, positive changes – eating a little healthier, exercising a little, creating some small productive habits, for example – is an amazing way to get excited about life.

And if you start small, you don’t need a lot of motivation to get started either.  Just get going!  The simple act of getting started and doing something will give you the momentum you need, and soon you’ll find yourself in a positive spiral of changes – one building on the other.

6.  Acknowledge the lesson, smile, and try again.

The real winners in life cultivate optimism.  They have the ability to manufacture their own happiness and drive.  No matter what the situation, the successful diva is the chick who will always find a way to put an optimistic spin on it.  She knows failure only as an opportunity to grow and learn a new lesson from life.  People who think optimistically see the world as a place packed with endless opportunities, especially in trying times.

It’s important to remember that everything is a life lesson.  Everyone you meet, everything you encounter, etc.  They’re all part of the learning experience we call ‘life.’  Never forget to acknowledge the lesson, especially when things don’t go your way.  If you don’t get a job you wanted or a relationship doesn’t work, it only means something better is out there waiting.  And the lesson you just learned is the first step towards it.

You must think positively.  Positive thinking is at the forefront of every great success story.  The mind must believe it can do something before it is capable of actually doing it.

When wild animals are first captured and put into zoo cages, they try everything to get out of that cage.  They bite it, run into it with their full weight, and claw at the cage.  They persist for weeks and months and they take any chance they can to free themselves.

But after a few years of captivity these wild animals lose their fierce desire to be free.  You could leave the cage door unlocked so the animals could escape if they wanted to, but they won’t.  They won’t even try, because they’ve become comfortable and given up the instinct that they could ever be free again.

Are you like these wild animals in a cage?  Have you lost your initiative to succeed and make good things happen in your life?  Is your mind stuck in the gutter?

You may think your past is indicative of your future, and that you’ve been cast in an imprisoning mold.  You may believe that just because you haven’t yet been successful in X, Y or Z that you will never be successful in that venture and you may as well accept your fate.

The mindset of your past being indicative of your future is a trap – an extremely easy and unnecessary trap.  But the truth is, your reality can be whatever you want it to be.  The limits to what you can achieve are an illusion.  These achievement limits are all in your head.  You’ve got to keep a positive outlook and continue to press forward through the tough times in order to enjoy the greatest moments of your life.  Read The Magic of Thinking Big.

7.  Pay attention and enjoy your life as it happens.

There is nothing wrong with looking forward to things.  I’m sure we all agree that it’s nice to know enjoyable events are coming up in our schedules.  The problem is, once an event we’ve been looking forward to is upon us, we’re often already on the lookout for the next one – the next high.
by Marc Hack-Practical Tips for Productive Living

http://www.marcandangel.com/about/

by The National Care Planning Council

Remember when your parents were lecturing you on the rules for taking the car for a spin? Dad would put his face in front of yours and say, “Are you listening?” Of course you would say “sure” even though your mind was miles away on the adventure to come.

Today, as adults the children who received the council and wisdom of their parents are facing a reverse situation in their lives. They are finding themselves concerned about their aging parents and what their needs will be as their health and mental abilities fail them. In some cases the children must take the role as parent in securing the safety and well being of an elderly family member.

Julie lives 600 miles from her mother. Knowing her mothers health is frail and she lives alone, Julie calls her every evening after work. The conversation always goes like this;

“How are you doing today Mom, Julie asks?
“Everything’s fine”, Mother replies.
“Are you taking your pills?”
“Yes, everything’s fine.”
“Do you need anything?”
“Everything’s fine.”

Julie does not get much more conversation from her mother. Perhaps everything is fine, or perhaps Julie’s mother just wants Julie to think she can take care of herself. Even worse, mother could think all is fine and be forgetting her medication and not eating properly.

Is Julie really listening? ARE YOU LISTENING?

It may be time to put your face in front of your parent and listen.

Assuming that all is well and that your elderly family member knows and does what is best for them, may be putting them at risk.

Become a partner with them in their care. The best time to form the partnership is before a crisis happens.

Donna Schempp, a licensed clinical social worker and program director at the Family Caregiver Alliance, states that in talking to your parents, “The sooner, the better.” If you bring up the subject before your parents need any extra support, “then it’s not crisis driven,” she explains. “It’s not a way of saying, ‘Mom, Dad, there’s something wrong with you.”

A good way to begin is to sit with your parents and ask questions like, what are your concerns for the future. Do you want to remain in your home? Are you worried about losing your independence? Listen to their answers. You might relate your concerns as well, or you desire to be of help.

In become a partner in planning for care and helping your loved one, you need to know what legal and financial arrangements are in place. By asking, “What if you had a stroke, Mom, I would need to know where your medical and insurance documents are and what you would have me do in your behalf.”

The next step might be to accompany them to their doctor appointment so to understand what their medical needs are and help create a plan for future needs.

The National Care Planning Council’s book “The 4 Steps of Long Term Care Planning” gives the following list of most common services family care givers will provide for their parents.

• Walking, lifting, and bathing
• Using the bathroom and with incontinence
• Providing pain management
• Preventing unsafe behavior and preventing wandering
• Providing comfort and assurance or arranging for professional counseling
• Feeding
• Answering the phone
• Making arrangements for therapy, meeting medical needs, and doctors’ appointments
• Providing meals
• Maintaining the household
• Shopping and running errands
• Providing transportation
• Administering medications
• Managing money and paying bills
• Doing the laundry
• Attending to personal hygiene and personal grooming
• Writing letters or notes
• Making repairs to the home, maintaining a yard

There are many resources available to help families in caring for their elder parents. As you become involved you will know when it is time to bring in professional services to help or when the need to find new living arrangements is necessary.

Beginning now to talk, listen and plan together can make the journey more pleasant for everyone involved.

The oldest baby boomers will turn 66 this year. And, with all due apologies to Sir Paul McCartney, it’s a much more significant number than 64 for retirement planning. As you advisors know, when you’re 66, you can claim full Social Security benefits; 65 is a close runner-up, since it’s the year most seniors will file for Medicare.

Social Security and Medicare may be outside the direct purview of most financial advisors. But advisors should understand the ins and outs of filing for both of these critical retirement benefits, and check up to make clients pursue smart strategies and file correctly. Social Security replaces one-third of income for the average retiree, and it’s an especially important source of longevity insurance for seniors who reach very advanced ages – especially women. And Medicare is a critical component in meeting the escalating cost of health care in retirement.

With that in mind, here’s a checklist of key points to remember when your clients are no longer 64. (And don’t forget: You’ll be older too — if only down the long and winding road. Sorry, couldn’t resist the Beatles pun.)

Social Security

Filing age. About half of all Americans file for Social Security at age 62–the first year of eligibility for benefits. But for most, it’s a costly mistake that will mean foregoing thousands of dollars in higher benefits. Although seniors can begin receiving checks at 62, annual benefits will be boosted for every year that they wait, up to age 70.

Many seniors worry about the math of lifetime benefits — that is, they fear they won’t live long enough to make delayed filing “pay off.” But those concerns are off the mark.

Social Security is built around actuarial principles – essentially, the mathematics of risk. And a central actuarial idea behind Social Security is the Normal Retirement Age (NRA), a rule used by the Social Security Administration to ensure the system pays out fairly among all beneficiaries. But the main value of Social Security is replacement of current income, not accumulation of assets. That’s where filing later can help.

Monthly benefits for earlier filers are reduced accordingly to avoid paying then higher lifetime benefits. Under the rules, annual benefits are reduced 8 percent for most of the years you start early, based on an actuarial projection of average longevity. For a 62-year-old filing this year, the net effect will be a permanent reduction of annual benefits of 25 percent.

On the other hand, the SSA will bump up payments by eight percent for every year a senior delays filing beyond the NRA up until age 70, after which credits for waiting no longer are awarded.

Working while receiving benefits. The labor force is getting more gray as Americans work longer. If your client files for Social Security at her NRA, she can earn an unlimited amount of income and receive Social Security benefits. However, earlier filers are hit with a penalty on income over $14,640. (Social Security defines “income” in this context as wages from employment, or net earnings from self-employment). If earnings exceed the limit, $1 will be deducted from benefit payments for every $2 earned over that amount.

However, lifetime benefits wouldn’t be reduced because the withheld benefits are added back into benefits after the senior reaches the NRA.

Spousal benefits: Married couples need to pay attention to the interaction of both spouses’ benefits; certain provisions of the Social Security law can create powerful amplifying effects when the higher-earning spouse waits to file for benefits until the NRA or beyond. The bottom line is that it’s generally beneficial for the higher-earning spouse to delay taking Social Security benefits until the NRA or beyond. More details on the spousal rules can be found here and here.

Medicare

Filing isn’t automatic. Although Medicare eligibility begins at age 65, enrollment is only automatic for seniors who already have begun receiving Social Security benefits. In that case, the government mails a Medicare card three months before the date of eligibility. Clients who aren’t already receiving Social Security can apply for Medicare through the Social Security Administration, either by visiting a local office or online at the agency’s website.

To ensure that your clients’ Medicare Part B coverage start date is not delayed, your clients should apply three months before the month you turn 65, or up to 3 months after.

File on time. It’s best for your clients to start thinking about filing for Medicare before retirement, because failing to file within the enrollment window can lead to substantial Part B premium penalties – the monthly Part B premium jumps 10 percent for each full 12-month period that a senior could have had coverage but didn’t sign up. A mistake can be costly; a senior who fails to enroll for five years ultimately would face a 50 percent Part B penalty – 10 percent for each year.

“If you’re still working and have healthcare coverage, Medicare’s probably not on your radar. But it’s important to think about it a little bit in advance, especially when you hit 65,” says Adrienne Muralidharan, senior Medicare specialist for Allsup, which offers Medicare plan selection services. “If you don’t enroll in Medicare when you are first eligible, you may face stiff penalties when you do go to enroll – and those penalties will be with you for as long as you rely on Medicare.”

Coordinate with employer-based coverage. For seniors who still are employed at age 65, Medicare is the primary payor under certain circumstances, not in others. At companies with fewer than 20 employees, Medicare is the primary payor; at larger companies, the employer is primary. In the latter situation, a senior can postpone filing for Parts A (hospitalization) or B (outpatient services), although many choose to enroll for Part A anyway since it doesn’t require premium payments. Seniors can enroll later without penalty for up to eight months following retirement.

Employed seniors who opt to postpone enrollment should approach this decision with great caution – it should be discussed in person with the Social Security Administration and a workplace plan administrator. And, it’s best to notify Medicare at age 65 of a decision not to file in order to ensure that there won’t be problems with premium penalties later on. This can be done by checking off a box on the back of a Medicare card that has been sent, by calling the Social Security Administration or through the SSA website.

Traditional Medicare or managed care? Seniors can choose between traditional fee-for-service Medicare or Medicare Advantage, a managed care option that offers all-in-one medical and drug coverage. When a senior joins an Advantage plan, Medicare provides a fixed payment to the plan to cover Part A and Part B; there usually are additional co-payments and deductibles, depending on the plan. Here’s a detailed guide to the ins and outs of Advantage plans.

Watch out for premium surcharges. High-income seniors pay surcharges on premiums for Part B and Part D. The surcharges are paid by individuals with $85,000 or more in annual income, and joint filers with income over $170,000, and they scale upwards through four income brackets. The surcharges affect just 5 percent of seniors, since most are retired and don’t have that much income. But if you do have clients in these brackets, the payments are substantial.

Consider strategies that might keep the client under the income trigger. One possibility is taking portfolio withdrawals from a Roth IRA, which are not counted in Social Security’s definition of taxable income. Or, alternate withdrawals from taxable accounts so that the client doesn’t have to pay the surcharge every year.

Mind the gap. Many Medicare beneficiaries opt to purchase an optional Medigap policy, which charges an extra premium but caps out-of-pocket costs. If your clients plan to buy a Medigap policy, it’s best to do so during the six-month open-enrollment period, which is open for six months at the time they turn 65 or enroll in Medicare Part B. While no late enrollment penalties are levied, after the open enrollment, seniors may be required to take medical screening tests and can be rejected because of preexisting conditions.

Resources
The non-profit Medicare Rights Center offers an excellent, free online toolkit to assist professionals with Social Security and Medicare enrollment issues.

Allsup offers a free guide to Medicare filing.

The federal government publishes an annual – and very comprehensive – guide to Medicare annually. Click here to download the 2012 edition of Medicare & You.

Medicare produces a guide that explains how Medicare works with other kinds of insurance or coverage and who should pay seniors’ bills first.

My online guides to Medicare and Social Security basics are available at RetirementRevised.com

Visit the Medicare website to download a guide to Medigap plans.

About the Author
Mark Miller is a journalist and author who writes about trends in retirement and aging.

By Bedros Keuilian

Each and every day your head is being filled with trash. It’s happening to all of us. To some more than others. Let me explain…

I was recently talking to a program director for a major news network and the conversation turned to how news networks make their money. It’s probably no surprise to you that they make their money by selling advertising. But their big problem is that they need lots of eyeballs to make the most money. So they figured out that “trash”, as he called it, sells the most. By trash he means “news” that’s scary, filled with gossip and fear. You know, gloom and doom news.

In fact he went on to say that years ago when they tested running feel good segments on the news, less people stuck around to watch. Crazy? Yes.

But, this does prove two things…

1. Society is twice as likely to act on pain (fear) then pleasure.

2. They are intentionality putting trash into your head because that makes them more money.

So while you can use the first fact above to make more money by changing your marketing, the second fact is pretty scary because that “trash” has an effection you.

It’s actually been scientifically proven that your thoughts can be influenced by what you watch. Therefore, anything that enters into your conscious and subconscious mind can impact your beliefs. Since your thoughts affect your decisions and actions, that clearly shows you must be careful about how much ‘trash’ you allow into your mind.

This upcoming holiday season will give us a chance to spend time with loved ones (and our global readership will surely have similar experiences over the next six weeks). However, often our loved ones don’t quite necessarily understand what we seek to accomplish in our lives and may even discourage our ambitions.

In most cases, our relatives mean well, and aren’t trying to be negative, because they believe they are protecting us. But there are also some relatives who are just plain toxic to our goals in life.

Frankly, you can’t change those you are related to, but when you get back into the office next week, take some time to analyze your professional relationships. Are your surrounding yourself with the right types of people?

Fortunately, I have something that helps me keep my thoughts clean and clear all the time. And you can use it too to protect your mindset.

If you feel that sometimes you’re stuck in a bad place and want to change your thought patterns to those of the super successful then consider these changes in how you think:

• Eradicate the words “try” and “can’t” from your vocabulary
• Cut out negative people and energy vampires from your life
• Eliminate fear, greed, hate, and scarcity from your mindset
• Surround yourself with positive people who you want to be like

Use the list above to shift your thought patterns to a success mindset.

But never forget this. The harsh truth is that YOU need to take responsibility for your failures, successes, and lack of action. That is the number one reason people never get what they want – No personal responsibility. And with that they don’t take action and 12 months go by and at best they’re in the same place in life that they were last year… only older.

Don’t let that happen to you. Change your mindset today and take out the trash.

Nearly eight out of ten Americans acknowledge the increasing need for long term care (LTC) planning, yet nearly half (45%) aren’t sure how they will address future LTC needs, according to a study released today by Northwestern Mutual Life Insurance Company.

The study also found that almost two-thirds of people believe the cost of providing LTC services will rise faster than the return on their savings, and that slightly over half believe that long-term care costs will double in the next 14 years. Yet, less than one third are currently saving for future LTC needs.

“There is a clear disconnect between what Americans understand about long-term care needs and the steps they’ve taken to prepare,” said Steve Sperka, Northwestern Mutual vice president of long-term care. “In order to create flexibility and options in retirement, people need to address long term care risk as part of financial security planning.”

Northwestern Mutual’s survey was conducted online by Harris Interactive from October 11-13, and comprised 2,194 American adults ages 18 and older.

According to the survey, an estimated 27% of women report that they have been a caregiver compared to 22% of men. Additionally, two-thirds of women polled said that they’re more likely to report that the physical demand of caregiving is their biggest challenge versus less than 50% of men.

Compounding the issue is the fact that women, on average, live five years longer than men, according to data from the Centers for Disease Control. Despite this fact, the study showed that fewer women are saving for their future needs (24% for women vs. 32% for men).

“There’s no doubt that long-term care is a pronounced issue for women, who tend to live longer and are more likely to provide care during their lives,” Sperka added. “This just amplifies the importance of planning for women, in order to maintain control over their finances and lifestyle through retirement.”

The study found that respondents with caregiving experience are:

• Almost twice as likely as those who haven’t had caregiving experience to have discussed long term care options with family and friends (43% vs. 23%)

• Almost twice as likely to have addressed the need for long term care within their retirement plans (30% vs. 17%)

• More likely to understand their options and the resources available when it comes to LTC planning (56% vs. 34%)

Required Minimum Distribution (RMD) for retirement account owners:

Generally, your RMD must be taken by December 31 of the year for which it is due. However, an exception applies to your first RMD, which is due for the year in which you reach age 70 ½. Under this exception, your RMD for the year that you reach age 70 ½ can be deferred until April 1 of the following year. Caution: If you defer taking your RMD for the year you reach age 70 1/2 until the following year (taking it by April 1), you will need to take two RMD amounts for that year. That is because the second and all subsequent RMDs must be taken by December 31 of the year for which it is due. Taking two RMD amounts in one year could impact your income taxes, as it could put you in a higher tax bracket. Consult with your tax professional, who should be able to advise you on the tax impact of taking your first RMD in your 70 ½ year vs. deferring it until the next year.

By Mark Ford

I consider myself to be an expert of sorts on retirement. Not because I’ve studied the subject, but because I’ve retired three times.

Yes, I’m a three-time failure at retiring. But I’ve learned from my mistakes. Today, I’d like to tell you about the worst mistake retirees make.

It’s a common mistake… Yet, I’ve never heard it mentioned by retirement experts. Nor have I read a word about it in retirement books…

The biggest mistake retired people make is giving up all their active income.

When I say active income, I mean the money you make through your labor or through a business you own. Passive income refers to the income you get from Social Security, a pension, or from a retirement account. You can increase your active income by working more. But the only way you can increase your passive income is by getting higher rates of return on your investment.

When you give up your active income, two bad things happen:

First, your connection to your active income is cut off. With every month that passes, it becomes more difficult to get it back.

Second, your ability to make smart investment decisions drops because of your dependence on passive income.

Retirement is a wonderful idea: put a portion of your income into an investment account for 40 years and then withdraw from it for the rest of your life. Once you retire, you won’t have to work anymore. Instead, you will fill your days with fun activities: traveling, golfing, going to the movies, and visiting the kids and grandkids.

But consider this: A retirement lifestyle for two, like the one I described above, would cost about $75,000 a year, or $100,000 before taxes.

How big of a retirement account do you need to fund that?

Let’s assume that you and your spouse could count on $25,000 a year from Social Security and another $25,000 from a pension plan (two big “ifs”). To earn the $50,000 balance in the safest way possible (from a savings account), you’d need about $5 million, because savings accounts only pay 1% right now.

If you were willing to take a bit more risk and invest in tax-free municipal bonds (this is the safety level I like), you’d need about $1.25 million, assuming you could get 4% interest.

But middle-class American couples my age are trying to retire with an account in the $250,000 to $300,000 range. And that’s where the trouble begins. To achieve an annual return of $50,000 on $300,000, you’d need to make 17% a year.

Getting 17% consistently over, say, 20 years may not be impossible, but it’s very risky – too risky for my tastes.

I retired for the first time when I was 39. I put my money into ultra-safe municipal bonds. I soon realized, however, that to maintain the lifestyle I wanted, I would have to get a greater return on my investments – I would have to take greater risks with my money by investing in stocks. But when I studied the history of yearly stock market performance, I came to the conclusion that I couldn’t confidently expect to get the return I needed, year after year.

So what did I do? I went back to work.

I went back to earning an active income because I didn’t want to spend my days studying the market and my evenings worrying about my investments. And do you know what happened? The moment I started earning money again, I started to feel better.

Retirement isn’t supposed to be filled with money worries. And yet, that is exactly what you will get if you try to get above-par returns on your investments.

As I write this, millions of Americans my age are quitting their jobs and selling their businesses. They are reading financial magazines and subscribing to newsletters. They are hoping to find a stock selection system that will give them the 30% and 40% returns they need. But they will soon find out that such systems don’t exist. They will have good months and bad years, and they will compensate for those bad years by taking on more risk. The situation will go from bad to worse.

It doesn’t have to be this way. Let’s go back to the example of the couple with the $300,000 retirement fund and the $100,000-a-year retirement dream. To generate the $50,000 they need, they would have to earn about 17% a year in stocks. As I said, that is highly improbable. But if they each earned only $15,000 in active income, they would need a return of only about 7% on their retirement account, which is doable.

There are many ways for a retired person to earn a part-time, active income. You could do some consulting, start your own Web business, or earn money doing any sort of purposeful work.

I am not saying that you should give up on the idea of retirement. On the contrary, I’m saying that retirement might be more possible than you think.

But you must replace the old, defective idea that retirement means living off passive income only. Paint a new mental picture of what retirement can be: a life free from financial worry that includes lots of travel, fun, and leisure, funded in part by active income from doing some sort of meaningful work.

The first benefit of including an active income in your retirement planning is that you will be able to generate more money when you need to. But the other benefit – the one that no one talks about – is that it will allow you to make wiser investment decisions because you won’t be a slave to your investments.

As the number of family members providing care for aging parents increases, the solutions to find help with loss of income because of time off from employment for caregiving has become a major concern for many.

The demands on both the time and energy needed to provide the needed care can make it impossible to maintain both a full time job with full time caregiving.

Seeing a need to give support to family caregivers the federal government Administration on Aging created the National Family Caregiver Support Program.

State Area on Aging division manages this program on the state and community level to offer support services that include:

• Information to caregivers about available services;
• Assistance to caregivers in gaining access to supportive services;
• Individual counseling, organization of support groups, and caregiver training to assist caregivers in making decisions and solving problems relating to their roles;
• Respite care to enable caregivers to be temporarily relieved from their care giving responsibilities; and
• Supplemental services, on a limited basis, to complement the care provided by caregivers.

Medicaid Cash & Counseling Program

A Medicaid approved assistance program called Cash & Counseling may be used to provide funds to hire personal care aides as well as purchase items or services, including home modifications that help them live independently.

The PayingForSeniorCare.com website gives the following information about the program:

“For Medicaid eligible seniors, the process begins with an assessment in the home to determine the senior’s home care needs; this includes interviews with caregivers and possibly the senior’s physicians. A determination of how many monthly care hours are required is made. The benefit amount is calculated using that determination and cost of care for that geographic area. This amount can be increased or decreased as the senior’s needs change. A family care giver may need to qualify as a home health aid by the state to receive these funds.”

This program is executed by each individual state Area on Aging Services division. It is a relatively new program and is not yet available in all States. Check with your state Area on Aging Services department for availability.

Using the Veterans Aid and Attendance Pension Benefit

A totally overlooked source of money to pay family caregivers to provide care at home is the Aid and Attendance Pension Benefit. This money is available to veterans who served during a period of war. Pension money is also available to the widows of these veterans. This benefit, under the right circumstances, can provide up to $1,949 a month in additional income to pay family members to provide care at home.

Getting the aid and attendance benefit to pay for family caregivers is not an easy task. This is because there must be a caregiver contract in place, a physician medical evaluation done, income and asset qualifications met and proof of medical expenses provided. Submitting the correct forms and documentation can easily be completed with the help of a VA Accredited Consultant who understands the process.

Long Term Care Insurance Benefit

If the senior being cared for has a long term care insurance policy that covers home care, payment to the care giver from this source could be arranged. Some policies require the care provider to be through a licensed home car agency, but others will pay for individual aides certified as such. This would require some training by the family member to become certified. There are policies that pay a daily benefit amount to the insured to use as they want to pay for their care. Check with a long term care insurance professional about types of policies.

Caregiver Contract

In some cases the senior parent has the funds to pay for care. If a family member is giving care it is very important that a caregiver contract be in place. A signed and dated agreement will outline the services provided as well as the amount of pay for these services. The contract will eliminate questions about what is expected from both parent and caregiver as well as providing a legitimate contract and payment record of services to qualify for Medicaid.

Attorney John L Roberts, in his article titled “Caregiver Contracts that Protect Elders and Their Family Members” states:

“A written Caregiver Contract is a good idea for every family that wants to protect family harmony, and make sure everyone in the family understands how care is being provided to an elder.

The family member who provides care can save an elder from needing nursing home services, and may also protect assets if nursing home care is needed in the future. Elders who want to cover all of these bases must have a written Caregiver Contract. Whenever adult children and other family members are providing valuable care, only a written agreement will protect assets from nursing home care costs and qualify the elder for Medicaid.”

In having the parent pay a family member for care giving, it will be an employer/employee situation and payroll records must be kept with payroll taxes paid.

This can also be set up by an elder law attorney at the time the contract is done.

Final Note

Taking the time to create the caregiver contract, research the government and state services that are available to caregivers and using community resources will make the family care giving experience less stressful.

“The 4 Steps of Long Term Care Planning” from the National Care Planning Council

Martin V. Higgins, CFP, CLU, AEP is a financial practitioner who specializes in helping people prepare financially for long term care.

Family Wealth Management is a professional firm providing customized financial planning and wealth management solutions to our clientele of pre-retirees, retirees, widows and small business owners.

We invite you to visit our website @ http://www. savethespouse.com to learn how Family Wealth Management may be the right choice for you, your family or business.

Martin Higgins is a registered representative and investment adviser representative of Mutual of Omaha Investor Services, a securities broker/dealer and registered investment adviser. Home Office: Mutual of Omaha Plaza, Omaha, NE 68175-1020 Member FINRA/SIPC. There is no contractual relationship between Family Wealth Management and Mutual of Omaha Investor Services, Inc. Martin Higgins can only do business in states in which he is registered. The information presented in this newsletter is intended for educational purposes only, and is not intended to replace the advice of an attorney or qualified tax professional.

By Bill Losey, Retirement Solutions

A recent survey found that over 60% of women feel they are better at handling money than men are. However, married women sometimes find themselves in perplexing financial situations – conditions that might be avoided with a little planning and/or foresight. With vigilance, you can plan to steer clear of these mistakes.

Not saving enough for retirement after marriage. If your spouse earns a huge salary and has invested avidly, you may have less impetus to save for retirement yourself. Your IRA, 401(k) or 403(b) may start to seem more supplemental than primary. Yet what happens if the relationship ends someday and you personally end up with a retirement savings shortfall? Keep contributing to your own retirement accounts.

Dipping into retirement savings once married.If your spouse is really wealthy or has much greater net worth than you do, your retirement nest egg may seem minor in comparison. Your spouse may tell you that with all the investments and savings that you collectively possess, you taking a loan out of your 401(k) won’t be that bad. Well, drawing down your own retirement savings could look like a very bad move 20 or 30 years from now. Who knows what changes life could have in store? Resist the temptation to siphon off your retirement savings.

Trusting a reckless spouse with your finances. When you love someone who is cavalier with money, look out. Beware of ceding financial control or your financial say in such a situation. If you marry someone with severe debt problems, don’t think that you will be financially immune from the effects of those problems. If your spouse is a wastrel or has a terrible credit rating, do not “hand over the keys” to the household finances. Watch what goes on with the bank accounts, investment accounts and credit cards among you– keep communication open and encourage transparency.

Forfeiting some or all of your financial identity.You may have taken your spouse’s name, but that does not mean you need to give up your own credit card for a shared one, merge your personal checking account into a joint one, and so forth. If you don’t use a credit card for several months or years, you won’t have to pay a fee but it could show up as “inactive” on your credit report. The credit card issuer may move to close the account, and losing the credit history of that card could hurt your credit score. Retain individual savings and investment accounts and individual credit cards.

Divorcing with an “equal” rather than equitable financial settlement.If a divorce happens, the impulse may be to amicably split things “50/50” … or, the focus may be on keeping custody of your kids or keeping your home with your financial potential a distant second. However, you must keep your financial future in mind.

Quite often, a woman will be instrumental in building a business or professional practice with her spouse – but she may not be a part of that successful company or professional entity after a divorce. If you divorce and have helped your spouse build a business to greater or lesser degree, you may not only find yourself out of work but taking a job that pays less or having to learn new skills to compete in the job market. Your earnings potential and retirement savings potential may be affected. If you should divorce, seek an equitable settlement that considers your future financial potential; this is even more important than retaining material wealth or real property from the marriage.

Losing touch with your career path. If you have happily put a career aside to raise kids, keep in mind that you might find yourself returning to work sooner rather than later. Life events, economic necessity, personal desire and growing children may all be factors. Yet a long, total absence from the workplace can make it difficult to step back in – the technology or outlook of any given field can change radically across a few short years. Try to keep a foot (or at least a toe) in your career via consulting or networking efforts.

The takeaway: look out for your financial well-being.It is okay to emphasize (and plan for) your own financial destiny when you are married. In fact, it is both wise and appropriate to do so.  Let me know how I can help you.