Death represents a significant and vulnerable point in time for both the individual facing it and his or her loved ones. In the medical field, it is even associated with failure; only five out of 125 medical schools (4%) in the country offer a course on death and dying. This negative stigma means that what should be accepted as a natural part of life, often becomes an uncomfortable topic.
However, it is important to talk about death with loved ones. There are emotional benefits to reflecting on a life spent together, and expressing gratitude and admiration. It is also important to ask difficult questions so that this topic receives adequate attention and preparation. While everyone would prefer to focus on life, a significant amount of stress related to death can be reduced by proper planning.
Press play to hear McManus & Associates Founding Principal John O. McManus explain his 10 recommendations below for getting the best end-of-life care:
1. Know your options – What is the difference between hospice and palliative care?
2. Dot your i’s and cross your t’s – Are all the necessary legal documents in order?
3. Broach the subject – Have you had a discussion with your loved one to understand what his or her wishes are?
4. Nail down the timeline – When does your loved one want end-of-life care to begin?
5. Research reputation – Have you discovered all that you can about the potential care facilities that you are considering?
6. Find out who is behind the mask – How well do you know your loved one’s care providers?
7. Do your due diligence – Have you done your own research? Have you asked care providers to tell you what you can do to help? Have you explored all of the factors that could influence your decision?
8. Learn the ins and outs – Is in-patient or out-patient care best for your loved one and family?
9. Prepare Plan B – Do you have a backup plan?
10. Ask for help – Could your loved one and family benefit from counseling?
For guidance on ensuring that your estate plan reflects your wishes for life and death, contact McManus & Associates at 908-898-0100.
Andrea Coombes, Ways & Means columnist for MarketWatch, recently took on the task of identifying “hidden pitfalls” of Health Savings Accounts, which are medical savings accounts with tax advantages. For her piece, she spoke with John O. McManus to learn what happens to HSAs when the accountholder passes away.
The fourth item on Coombes’ list of 10 pitfalls:
Your entire HSA account becomes taxable when you die, unless you’ve named your spouse as beneficiary, in which case your account becomes your spouse’s HSA. So, from an estate planning perspective, what’s the best way to handle these accounts, assuming you’re older and have a hefty sum stashed? “Our view is postpone withdrawals from accounts that are compounding tax-free,” John O. McManus, founder of McManus & Associates, a trusts and estates law firm in New York and New Providence, N.J. Once you’re over 65, you can withdraw money without the 20% penalty faced by those under 65. (If you spend on non-medical costs, you’ll owe income tax, which is the same as withdrawing from a traditional IRA, but health accounts don’t have required minimum distributions, so you have more control.) Letting the money grow is valuable, McManus says, given that people are living into their 90s and nursing-home costs can run “$100,000 just for living quarters and medical assistance.” If you bequeath the account to a non-spouse beneficiary, he or she will owe income tax on its fair market value.
To read Coombes’ full column, “10 hidden pitfalls of health savings accounts,” click here. For guidance on utilization of investment and savings vehicles as part of your estate plan, give McManus & Associates a call at 908-898-0100.
Reporting for Next Avenue, which provides news and discussion of issues relevant to Americans over 50 including topics related to money and security, Richard Eisenbergwrites that the smartest moves you can make now are ones that ignore the what-ifs since no one knows how the tax rules will change.
His piece, “Year-End Tax Planning in the Age of the Fiscal Cliff,” provides 8 Year-End Tax Moves to Consider:
1. Rough out your 2012 taxes to see whether you’re likely to owe the IRS money or get a refund.
2. If you have a flexible spending account, or FSA, for health expenses at work, use every penny of it before January.
3. Load up on charitable contributions by Dec. 31 if you expect to itemize deductions on your 2012 return.
4. Try to put more money in your 401(k) plan before year’s end.
5. If you’re self-employed, look into opening a tax-deductible Solo 401(k) plan before Jan. 1.
6. Consider converting your traditional IRA to a Roth IRA if you’re confident your tax rate will rise after 2012.
7. See whether you’ll save on taxes by paying for some discretionary medical expenses this year.
8. Make year-end gifts to your children or grandchildren.
Eisenberg’s article also sources guidance from McManus & Associates’ founding attorney John O. McManus:
Next year, the estate tax exemption is scheduled to fall to $1 million and assets over that amount would be taxed at a 55 percent rate. President Barack Obama has proposed setting the estate tax exemption at $3.5 million and the estate tax rate at 45 percent. That’s more likely to happen than Congress extending the current estate tax rules, according to John O. McManus, an estate lawyer with McManus & Associates in New Providence, N.J.
But no one can say for sure what the outcome of the fiscal cliff negotiations will be. So estate planners recommend taking advantage of the estate and gift tax laws on the books this year. Making gifts to your kids or grandkids in December might not only save you taxes, it could help brighten their financial futures, too.