Paul O. Dillon, Attorney at Law

Optimize Estate Planning and Update Financial Baseline to Secure Your Future

Revisiting estate planning and financial strategies in the first quarter of the year can yield long-lasting benefits, according to a recent article from Kiplinger, “10 Ways to Refine Your Financial Plan for a More Secure Future.” No matter how busy you are, these ten steps are a good use of your time.

Conduct an annual financial review. Gain a clear view of your financial situation to make informed decisions. Is your net worth the same as it was last year? How have your assets and liabilities changed? Has recent market volatility or a large purchase impacted your overall financial situation? An objective look from a bird’s-eye view shows whether you’re still on track to reach your goals or if you’re retired, ensuring that you’re still on the right path.

Review your philanthropic plans. Whether you’re donating a wing to a local hospital or making monthly donations to local charities, review your giving over the last twelve months. Are you taking advantage of tax benefits through strategies like Donor-Advised Funds (DAFs), or should you consider using Charitable Trusts instead? Consult with your estate planning attorney to ensure that your generosity also benefits you and your family if that is an objective.

Review budgets and spending habits. Having discretionary income doesn’t necessitate a free-for-all. Understanding income and spending is fundamental to financial health at any level. Examine last year’s expenses and separate out one-time costs, such as installing a new roof or incurring large medical bills. Once you’ve identified spending habits, map out a plan for the rest of the year. Treating money with intention is more rewarding.

What’s your illiquid compensation? If you establish a 10b5-1 plan, you can execute stock transactions during open trading windows, mitigating legal risk and balancing your corporate responsibility with personal priorities. This type of plan allows you to schedule trades in advance and align transactions with both near-term and long-term goals. Know the value of any non-cash compensation and how much of your net worth it represents.

Is it time to rebalance your portfolio? If you haven’t rebalanced your portfolio in the last year, now is the time to do so. Be sure your asset mix is still what you wanted. The nature of markets and fund managers makes it impossible to avoid shifts entirely.

Maximize tax-advantaged accounts. Don’t leave money on the table. Accounts like 401(k)s, IRAs, HSAs and 529 plans all work to maximize tax advantages. However, it is only if you’re making contributions strategically. If your income is too high for direct contributions, or if you have a lower income, consider Roth conversions for IRAs and 401(k) plans.

Check your risk management. Insurance isn’t as sexy as investment portfolios. However, the protection is worth the investment. Make sure your wealth is protected with the correct insurance and a good estate plan.

Review estate planning and make annual exclusion gifts. Your estate planning attorney can explain how using your annual exclusion can help reduce estate tax exposure and benefit your loved ones. You can give $19,000 to as many people as you want annually without triggering any gift taxes or reducing your lifetime estate tax exemption. Making these gifts earlier in the year allows for more growth over time, making it a smart move for generational wealth transfers.

Tax planning season. If your finances are complex and your assets extensive, tax-saving strategies need to be revisited annually, and the first quarter is the most likely time. Let’s say you expect to have significant capital gains; charitable giving or tax-loss harvesting earlier in the year can help offset those tax liabilities.

Talk with your family about money. If your goal is to leave a legacy, you’ll want to discuss your values, philanthropy and creating a legacy with your family regularly, as well as stewarding wealth across generations. A habit of regular check-ins about finances will help establish a shared vision for both short-term and long-term goals.

Reference: Kiplinger (March 6, 2025) “10 Ways to Refine Your Financial Plan for a More Secure Future”

Who’s On Your Estate Planning Team?

Figuring out when to retire is one of the biggest decisions people make. Engaging with trusted professionals can help you make the best decision for your circumstances. To be sure you’re fully prepared, an aptly-titled article from Kiplinger recommends “The Six People You Need to Talk to Before Retiring—and the Best Questions to Ask.”

A financial planner will help clarify long-term wishes and goals. By working with a financial advisor early on, you’ll have someone to develop a plan for the lifestyle you want in retirement and understand how to get there. When you’re closer to retirement, they’ll help button down your plan and help you make realistic decisions.

An experienced estate planning attorney will ensure that your estate is prepared correctly and your legal affairs are in order, with protection in place if you become incapacitated and after you’ve passed. Even if you don’t expect to leave significant assets to heirs, your family will appreciate your having an estate plan so they aren’t faced with the stressful challenges and costly problems occurring when there is no will. The estate planning attorney will discuss whether you need a trust to protect assets and smoothly transfer assets to beneficiaries.

You’ll also want Power of Attorney and Health Care Proxy documents created specifically to your wishes. These documents allow a person you choose to take care of financial and health matters if you cannot speak on your own behalf. Talk with the estate planning attorney about ensuring that assets are distributed according to your wishes and minimizing estate taxes for heirs.

An insurance broker will help with risk management before and after retirement. They can help with the options for Medicare and health insurance coverage, which can be overwhelming once you leave an employer’s plan. Talk with an insurance agent about long-term care costs and what policies are available. You may need to purchase a hybrid life insurance plan to obtain long-term care insurance. However, long-term care costs are exorbitant, so you should have an LTC policy if possible.

Most people don’t know about working with a senior living advisor. However, they can be invaluable to enhancing the quality of your life in retirement. They help people identify a wide variety of tools and services. For instance, many new tech tools are making it safer for seniors to stay in their homes, local services through various agencies and longevity care options to explore.

Social Security advisors add another layer of knowledge to retirement planning. A Social Security advisor will help determine the best time to take benefits based on your financial situation. There’s more than your age to consider. Death of a spouse, divorce, chronic conditions and disability should be considered when deciding on the best time to take benefits.

Retirees need to have a CPA on their team as well. Balancing withdrawals from tax-advantaged accounts like IRAs or pensions, Social Security benefits, and withdrawals from investment accounts must be planned with taxes in mind. A CPA will help you create a plan for cash flow in retirement.

Americans don’t like to talk about death or money. However, when preparing for retirement, these subjects must be discussed to create a good plan. When you’ve identified your team, don’t hold back. The more information you share with them, the better they can help prepare for an enjoyable retirement.

Reference: Kiplinger (Feb. 27, 2025) “The Six People You Need to Talk to Before Retiring—and the Best Questions to Ask”

Do I Need Estate and Retirement Plans If I Don’t Have Kids?

If you have children, you may not want to depend on them for financial help as you age. However, if it becomes necessary, at least it’s an option. However, if you are one of roughly twenty-three percent of adults in their 50s and twenty-two percent of people in their 60s who never had children, your retirement and estate planning needs to be different.

A recent article from AARP, “How to Plan for Retirement When You Don’t Have Kids,” explains there’s no guarantee, and even if you have children, you’ll need estate and retirement plans.

Having a support team is mission critical. This means having someone who will be able to deal with money and health matters if you can’t because of physical disability or cognitive decline. Think about who is in your extended family or close circle of trusted friends who might serve as your power of attorney or healthcare proxy. Ideally, name someone in relatively good health, possibly younger than you, who lives nearby. Child-free people often have strong bonds with nieces or nephews who are good candidates to be potential caregivers.

An alternative is finding an aging life care professional, sometimes known as a geriatric care manager, to help address health, financial and housing concerns as well as coordinate caregiving and related services for you.

Don’t wait until you need help. Talk with prospective candidates now and meet with an estate planning attorney to start putting plans in motion.

You’ll also want to plan for the possibility of long-term care. The cost of these policies increases as you age, so buying them in your 30s or 40s is ideal. A private room in a nursing home can easily cost as much as $100,000 a year, which can rapidly deplete a nest egg.

Estate planning is different for child-free people. While you may have more disposable income because of not having the financial obligations of children, you may also feel it’s less important to have a legacy. However, you’ll still want a voice in where your assets go after your death.

If you don’t have children and you don’t have a will, the laws of your state will dictate who receives your assets. If you’re passionate about an organization, it won’t receive anything. However, your estranged cousin who lives thousands of miles away and is next-of-kin may inherit your entire estate. If you have ideas about where your assets should go, you’ll want a will.

Creating an estate plan with an experienced estate planning attorney is important for those without and with children. Make an appointment and get this part of your life settled, so you can enjoy your retirement without worry.

Reference: AARP (March 3, 2025) “How to Plan for Retirement When You Don’t Have Kids”

What Is the Great Wealth Transfer?

Without the right estate planning, a lot of the expected inherited money may go to taxes and legal fees instead of heirs hoping for a windfall, says a recent article from Morningstar, “Looking forward to the great wealth transfer? Expect an $84 trillion mess instead.”

Most people who could potentially leave assets to their heirs or a charity don’t have an estate plan. They might also spend all their money before they die. The big inheritance predicted by personal finance pundits is more likely to consist of life lessons, personal values, or a collection of salt and pepper shakers than the family home or big chunks of cash.

After COVID, people started taking a last will and testament and estate plan more seriously. So many families lost loved ones unexpectedly and were stunned not only by their loss but also by the complexity and cost of settling estates without estate plans, wills, or trusts. That seems to have faded, which will burden another generation.

Some assets can be passed along through a beneficiary designation, like bank or retirement accounts. However, if you intend to pass the family home or a vacation home to the next generation, you’ll need to plan for it.

At the very least, an estate plan should include a will. To make the transfer of property like a home easier and less costly for heirs, you’ll want to meet with an estate planning attorney and have a trust created.

If you die without estate planning, your heirs must go to court to determine how your estate should be distributed. Most people hire an estate planning attorney to manage this process—the same attorney who could have created an estate plan to avoid the time, stress and cost of not having an estate plan.

As of this writing, the current federal estate tax exemption of $13.99 million per person is still scheduled to expire at the end of 2025. If Congress doesn’t act, it will be cut in half, meaning many more Americans will pay federal and state estate taxes. Whether or not this exemption will be extended is yet unknown. High net-worth families have already taken steps to prepare. However, many are still sitting on the sidelines waiting to see what happens. Waiting may turn out to be an expensive decision.

Families with less wealth may lose their retirement nest eggs because of healthcare spending and increased longevity.

The chances of spending down your assets and leaving nothing behind depend on your estate planning. If you want to leave your children and grandchildren an inheritance, make an appointment with an estate planning attorney to learn how to make this happen.

Reference: Morningstar (Feb. 25, 2025) “Looking forward to the great wealth transfer? Expect an $84 trillion mess instead”

Does an Estate Plan Improve Retirement?

Estate planning is more than determining who you want to inherit your worldly goods. It’s about planning for taxes, protecting yourself while alive and making life easier for heirs by streamlining asset transfers. A recent article from Kiplinger, aptly titled “Here’s How Estate Planning Can Make Your Retirement Easier,” explains it in detail.

Trusts are used to protect assets and are widely considered the most effective tools for estate planning. Timing matters in estate planning. If you might need to apply for Medicaid for long-term care, keep in mind there is a five-year look-back period. Trusts need to be funded for at least five years before assets are considered exempt for Medicaid purposes.

Let’s say you establish a trust when you turn 70 but need long-term care at age 73. Medicaid won’t consider you eligible until age 75. We can’t know when we will need long-term care. However, planning ahead makes applying for Medicaid better than dealing with an application during a health crisis. Talk with your estate planning attorney about a Medicaid Asset Protection Trust to see if this might be a good fit.

Life insurance is often used to help with estate taxes. While most of us aren’t likely to worry about estate taxes while the federal exemption remains high, there are still state estate taxes and some state inheritance taxes to consider. The federal estate tax exemption may not sunset in 2026. However, a life insurance policy may be an option for your family if it does. Today’s life insurance policies are often combined with long-term healthcare coverage, which is always a wise option as we age.

Beneficiary designations are an often-overlooked estate planning pitfall with costly consequences. If you’ve named someone on an account as the beneficiary, they will receive the asset, regardless of what your will says. If you neglect to update your beneficiary designations, it will be next to impossible for other heirs to get the assets, even if they do go to court. This is an easy thing to fix. Review beneficiary designations every time you review your estate planning documents.

Estate and retirement planning doesn’t end once you have a plan in place. Both estate plans and retirement plans need to be monitored and updated. Tax laws change, markets fluctuate and personal circumstances change.

Regular reviews of your estate planning with your estate planning attorney every three to five years will allow you to ensure that your wishes are current, and no opportunities have been missed. Regular updates will ensure that beneficiaries are correct, trusts are funded properly and your will is still aligned with your state’s laws.

Reference: Kiplinger (Feb. 18, 2025) “Here’s How Estate Planning Can Make Your Retirement Easier”

What Kind of Trust Helps a Family with Young Children?

Trusts are not just for wealthy people. They are used when a family has young children and wishes to ensure that there is a plan in place to care for the children in case the parents die or become incapacitated. A recent article from Business Insider, “I asked an estate planning attorney the best way to establish a trust for my 2-year-old daughter,” explains what parents can do to protect their youngest loved ones.

There are a few different trusts to consider, depending on your situation:

Revocable Living Trust. The revocable trust is the most flexible. It is a separate legal entity with language directing how assets will be used for different scenarios. For instance, if someone dies or becomes disabled and their beneficiaries are all children, the trustee will manage and allocate necessary financial resources to support the children. Many estate planning attorneys consider a trust even more important than a will, since it doesn’t require the estate to be settled before trustees can access the assets.

An IRA Trust. You may want to consider creating an IRA trust if you own an IRA. This allows a minor child to be the beneficiary of the retirement account. On the death of the IRA owner, assets go into the trust, which has a trustee who manages the asset until the person comes of age or whenever the original owner wants them to receive the money.

When a regular IRA account is left to a minor, the family must petition the court to obtain a court-appointed guardian to manage the account until the minor is of legal age. With an IRA trust, you’ve clarified who the trustee should be and when the child will receive the money. If the money is not needed and can remain in the trust, it is a protected asset for their future.

A Trust for Minors. This allows you to leave assets to a child until they reach a certain age, which you articulate in the trust. You can leave all or a portion of the money to the beneficiary to be distributed when you feel they can manage it. You decide when to release the funds, who the trustee should be, the rules for how the money is to be spent and when the minor may receive income.

An Education Trust. In addition to creating a 529 College Account for a minor child, it’s a good idea to create an Education Trust to be sure the funds will be used for education. You can assign a certain amount for education and state the age you’d like the beneficiary to receive any leftover funds.

An estate planning attorney can help you create a plan for your children or grandchildren to ensure that they have the funds they need in case of tragedy and place guardrails on the money so it’s protected.

Reference: Business Insider (Jan. 31, 2025) “I asked an estate planning attorney the best way to establish a trust for my 2-year-old daughter”

How to Create an Estate Plan That Works

An estate plan tells your loved ones and the courts how you want to divide your property, as well as protecting heirs from the expenses and stress created when there is no estate plan. According to a recent article from AOL, “Estate planning checklist: 7 key steps to making a successful plan,” an estate plan also saves your family from months, even years, of dealing with courts and government bureaucracies in settling your estate.

How to start? Follow these steps.

Make a complete inventory of your assets, both tangible and intangible. This means real estate, cars, financial accounts, digital assets, life insurance, retirement accounts, pension accounts and personal property. Save your heirs from a scavenger hunt and protect assets from being lost.

Decide who you want to care for your family. If you have children who are underage, name a guardian in your will. The guardian often serves as the conservator, managing the children's financial assets. Check on your life insurance policies, which provide funds for your family after you’ve passed.

Ask potential executors if they are willing to do the work. The executor carries out directions in your will. It can be a big responsibility. They’ll need to gather and manage assets, notify heirs, Social Security, Medicare, pay estate taxes, secure and possibly sell your home, and more.

Have an experienced estate planning attorney set up at least three key elements: a will, power of attorney and advance healthcare directive.

The Will names a guardian and an executor and gives directions for distributing assets. The biggest estate planning mistake people make is not having a will. When this happens, the court assigns someone to manage your estate, and your family will have to live with whatever the court-appointed person decides.

A Power of Attorney allows someone to care for your business affairs if incapacitated. A Medical Power of Attorney, or Healthcare Proxy, will enable you to name someone to be involved with your healthcare, speak with your doctors and health insurance company and help make decisions for you. These documents should be customized to convey your wishes as to how much or how little you want these people to be able to do.

An advanced healthcare directive is used to state your wishes if you are incapacitated about what kind of treatment you do or don’t want to receive if you are at the end of your life. For instance, if you don’t want to be resuscitated or if you don’t want CPR to be performed, this information goes into the AHD. This document can be challenging to consider. However, it is a blessing to spare your family from having to guess your wishes during a time of crisis.

Discuss the use of a trust with an estate planning attorney. Trusts are not just for wealthy people. Some trusts take assets from your taxable estate and distribute them directly to beneficiaries outside of probate. Many kinds of trusts serve different purposes, so your estate planning attorney will help you understand which is best for your purposes.

Determine who to leave your assets to and how to structure your estate. If you have young children and you don’t establish the correct trusts, they may inherit everything when they turn 18 or 21. This is rarely a good idea.

Tax planning is a part of estate planning. While you may not face federal taxes, your state may have its estate tax, and some states still have inheritance taxes. Rates and exemptions are different in every state.

The incapacity planning part of an estate plan is for you. However, the rest is for your family, to take care of them and show them how much you care about them and their futures.

Reference: AOL (Feb. 4, 2025) “Estate planning checklist: 7 key steps to making a successful plan”

How to Protect Your Inheritance

Receiving an inheritance, expected or not, can be life-changing. We’ve all read articles about people who lived frugally and never hinted at their savings, then left a fortune to heirs or a beloved pet. In reality, few families receive any inheritance, and most of those are less than $50,000. However, if you receive an inheritance, you should protect it, according to an article from Kiplinger, “Manage an Inheritance Like a Pro in Just Seven Steps.”

Before making any decisions, be sure to understand what you are inheriting. Most estate plans include a variety of assets, from real estate, investments, cash, retirement savings plans, life insurance proceeds and personal property.

Be patient. Estates don’t settle quickly. The executor will need to gather up all of the assets, and some may take longer than others to track down. Without a will, this process would be further complicated by court involvement and probate.

The inheritance rules differ depending on the asset, the state of residence, and the relationship. Spouses enjoy certain tax breaks that are unavailable to adult children or heirs. Some states impose an inheritance tax on family members based on kinship.

Depending upon the assets and your relationship with the deceased, you may or may not have to pay taxes. Unless your benefactor was ultra-high net worth, it’s not likely you’ll need to pay a federal estate tax. However, there are state estate taxes, depending on where you live, to be aware of.

Certain investments are taxable. Inherited stocks, mutual funds, or investments in a taxable account may enjoy a step-up in basis. The cost basis for these taxable assets, including stocks and mutual funds, is “stepped up” to the investment’s value on the day of the original owner’s death.

This tax treatment may make a taxable-account inheritance suitable for a short-term goal, like paying off high-interest debt or making a downpayment on a home. If you keep the money invested, make sure to review your entire portfolio to see how it impacts your investment strategy.

Tax-deferred retirement accounts can be complicated when inherited. Spouses may roll assets into their own IRAs and postpone distributions and associated taxes until they’re 73. However, an inherited IRA to most  peoplewill need to be emptied within ten years of the original owner's death, with Required Minimum Distributions. Your estate planning attorney can help you map out the withdrawals.

If you inherit a home, the property's value is stepped up to its value on the date of the owner’s death. Let’s say you inherit a property purchased for $150,000 but is now valued at $300,000. The basis is now $300,000. Selling an inherited home gets complicated, so rely on your estate planning attorney to work through the tax details.

Life insurance proceeds aren’t usually taxable as income. However, the money might be included in your estate to determine the value for federal or state estate taxes. If a death benefit is paid out in a lump sum instead of installments, the interest on the death benefit is taxable.

What about spending your inheritance? Once you’re sure you have the money to pay any taxes, enjoying the benefit of an inheritance makes good sense. For some, this is an opportunity to pay off student loans, lower or eliminate credit card debt and set some aside for retirement.

Most people overestimate how long their windfall will last and underestimate how quickly wealth can evaporate. To protect your inheritance, deposit the money in a secure account and don’t quit your day job. If you don’t have an estate plan, you’ll need one to protect your heirs. Make an appointment with an estate planning attorney now to guide you and prepare for the future when you might be the benefactor.

Reference: Kiplinger (Jan. 24, 2025) “Manage an Inheritance Like a Pro in Just Seven Steps”

Money Tips for the Coming Year

A fresh start for 2025 should include your financial life and your health and wellness resolutions. A recent article from USA Today, “Start 2025 off right with these 9 money moves,” offers good suggestions to make this new year a good one.

Get out of debt. If you have high-interest debt and high-earning investments, you’re only treading water and not getting ahead. Take care of the high-interest debt first if you want to see your net worth grow.

Try living below your means. Too many of us spend more than we bring in and then try to catch up (See “Get out of debt” above). The more significant the difference between what you earn and spend, the better your savings accounts will grow. If you’re saving for retirement and your kid’s education, changing spending from what you want to what you need will help.

Build an emergency fund. Unless you are lucky enough to have untapped wealth, you need an emergency fund in cash ready to pay for at least three months of non-negotiable expenses. This means taxes, housing, food, transportation, medical expenses, etc. Few people are ready to deal with the economic impact of losing a job, having to replace a car, or needing major surgery. Having an emergency fund protects you from needing to use retirement funds or take on debt to deal with a short-term financial crisis.

Revaluate your portfolio. Investing in great companies for the long haul is how most people set their investment portfolios. However, it makes sense to look at a rebalance every now and then. People who are in their high-earning years may be okay with a 60/40 split between stocks and bonds. However, as you get closer to retirement, you may want to change this. After a few years, when stocks grow faster than bonds, your 60/40 split from a few years ago might have become an 80/20 split.

Maximize retirement accounts. If you can make use of tax-advantaged retirement funds, your future self will thank you. Use IRAs and 401(k)s to build long term wealth. If your company has a matching program, make sure to maximize your contributions using what is essentially free money. Your retirement withdrawals will be tax-free, if you can use a Roth account and pay taxes when you make contributions.

Check beneficiary designations. Make a list of all the financial accounts with beneficiary designations and check to see if the people you named to receive the assets on your death are still the right people. This is especially true if you’ve gone through a divorce, moved, or married.

Get your estate planning documents in order. If you don’t have a will, durable power of attorney, healthcare power of attorney, living will, or advanced directive, make an appointment with an estate planning attorney now to get these documents in order. If you have these documents but they are more than four years old, you’ll want to update them to be sure they still reflect your wishes. If you have young children, be sure your will includes naming a guardian.

Celebrate the New Year by organizing your estate planning and financial life. Next year at this time, you’ll be glad you did.

Reference: USA Today (Jan. 5, 2025) “Start 2025 off right with these 9 money moves”

How to Balance Love and Legacy in a Second Marriage?

Getting married for the second or even third time presents many challenges for estate planning, finances and family dynamics. A thoughtful strategy can build a harmonious family and protect legacies, according to a recent article from The Street, “Love and Legacy: Balancing the Two in a Second Marriage.”

Finances can be a flash point for subsequent marriages, especially if spouses have different levels of assets. Mature couples typically come to a second marriage with children, houses, retirement accounts, alimony and credit card debt. How will assets be distributed, what will inheritances look like and how will the couple plan for the future? These are just a few questions to address when marrying again.

Other issues to consider:

Home ownership. Should the new spouse be added to the deed if one spouse owns a home and the other spouse moves in? This has implications for estate planning. If both spouses are on the deed, what is the plan upon the death of the first spouse? If the home automatically passes to the surviving spouse, the children of the deceased spouse may be excluded from their share of the home ownership.

Beneficiary designations. Marrying again with healthy retirement accounts requires looking ahead. If the new spouse is named a beneficiary, are the deceased’s children disinherited? What if a spouse wishes to leave money to their biological children only. However, the surviving spouse won’t have enough money to live on?

Inheritance rights. Balancing the inheritance of biological children while ensuring that the spouses have protected each other takes advance planning. Without it, a surviving spouse could be left homeless or dependent upon adult children for support. An estate planning attorney may recommend a marital trust to provide for the surviving spouse, while ensuring an inheritance for the children.

Social Security benefits. For those who counted on the higher benefit level of their first spouses, remarrying may impact SSI, surviving spouses, or divorced surviving spouse benefits. This is something to explore before marriage, since it can’t be undone.

These issues may feel overwhelming. However, tackling them before marriage can prevent friction between the couple and stepchildren. Among the many plans for a wedding, an appointment with an estate planning attorney should be made to create a personalized estate plan to address your unique situation, including children from prior marriages.

Your meeting should also include a complete review of all wills, trusts, beneficiary designations and retirement plans. Ensure that your documents reflect your new marriage and distribute assets according to your wishes.

Blended families are complicated and require personalized estate, tax, and financial planning. The increasing numbers of people choosing to love again and blend their families show how much people value being part of a family. Protecting your family with a well-thought-out estate plan can start a new marriage on the right foot.

Reference: The Street (Dec. 19, 2024) “Love and Legacy: Balancing the Two in a Second Marriage”