Long-term care insurance is one of the biggest topics of conversation among retirees and estate planners. The industry is going through a period of turmoil with many policyholders now cashing in on their long-term care needs and few new buyers signing up for long-term care insurance. As a result, companies that carry long-term care insurance are shifting the way that they approach these types of policies, and consumers should be looking for new trends in long-term care insurance.

Long-Term Care Insurance

There is good reason for shifting trends in the long-term care insurance industry. Sales for individual policies have plummeted over 75% in the last ten years, and only ten percent of long-term care insurance carriers are still in business. Those that remain continue to increase the premiums and tightly underwrite all of their policies. At this point, most long-term care insurance plans are only available for the wealthy and are unaffordable to the lower and middle class.

Trends in Long-Term Care Insurance

In order to make long-term care policies affordable and available to more consumers, the long-term care industry is looking to make some changes in their business model. These are some of the shifts that you can expect to see in the long-term care insurance industry during the coming years:

New premium structure
The previous premium structure on long-term care insurance was to keep premiums low and steady for years. However, high claims and a lack of returns have forced long-term care insurers to hike up the premium rates every few years. Some of the largest long-term care insurers are looking to create a new premium structure that would raise the premiums by a small amount every year, just like other types of insurance policies.

Cheaper policies with less coverage
More carriers are now selling long-term care policies with shorter terms and smaller benefits. However, these policies are also cheaper than previous long-term policies and are meant to attract new consumers to the market.

Simpler products sold online
The successes of online marketplaces like ebay.com, Healthcare.gov, and others have made long-term insurers think about offering products through a similar forum. It would require the policies to be simplified but would also allow the consumer to compare policies from different insurers. It would also require large regulatory changes but also cut down on consumer costs.

No rebound with group stand-alone insurance
Group long-term care policies are no longer as popular as they once were. As a result, fewer insurers are offering it as an option to new consumers, and do not be surprised if many long-term care insurers stop offering this option for coverage altogether.

Combination products
Some insurers are offering hybrid products like long-term care insurance combined with an annuity. This type of product spreads the risk for both the consumer and the insurer. While some firms have already made it an integral part of their retirement package, other companies are less excited about multi-risk products.

Combining health and long-term care insurance
While this option seems to be the furthest away from happening, there is a lot of talk amongst long-term care and life insurance carriers about creating a combination product. If it does occur, life insurance companies will most likely be the insurers carrying the policy, but figuring out the payment structure seems to be the biggest impediment to this option.

Public/private insurance partnerships
Many long-term care insurance companies are urging the government to get involved in the long-term care industry. One of the more popular options is for the government to cover catastrophic benefits while the private insurers cover the other long-term care expenses. The major issue to this option is figuring out where the funding for the government coverage would come from.

There are many couples at retirement age that have been together for years but have opted to not get married for personal, professional, or legal reasons. For these unmarried couples, estate planning is crucial if you want your partner to inherit from your estate. If the homeowner dies without a will in place, the other partner would be out on the street with little to no recourse. However, there are options to ensure that your partner is protected through your estate plan while simultaneously planning for the other loved ones in your life.

Estate Planning Options

For couples that want to protect their partner but still leave the home to their children, one of the more popular ways of dealing with this problem is to create a life estate for the surviving partner. If drafted correctly, the partner gets the right to live in the home until they move into a nursing home facility or pass away, at which point the real estate would revert to the children. If a couple decides to go with this option, it is smart to also leave money to the spouse specifically for the purpose of house maintenance and upkeep.

If one partner wishes to leave personal property, bank accounts, or other assets to their partner, having a will is incredibly important to have. Without a will, the partner is completely at the mercy of family members set to inherit the estate. Simply claiming that one partner wished for the other to inherit is not enough to beat intestacy laws in probate court. A will can specify what you wish for your partner to inherit in addition to what you want your loved ones to receive.

Potential Pitfalls

Unfortunately, the U.S. tax code does not look too favorably on unmarried couples for the purposes of estate planning. Under the code, married couples are allowed to inherit an unlimited amount of assets without paying any state or federal estate taxes. This exception also applies to gifts from one spouse to another while both people are still alive. However, this exemption does not apply to unmarried couples who wish to inherit or gift assets to each other.

The current federal estate exemption level is $5.43 million, but many states have lower thresholds for state estate or inheritance taxes. In some states like Pennsylvania, non-family heirs must pay up to fifteen percent of their inheritance for tax purposes. In addition, the annual gift exception of $14,000 applies to unmarried couples who wish to gift assets to one another before they die without owing taxes on the gift.

Finally, the federal tax code also favors married couples when it comes to inheriting both traditional and Roth IRAs. A spouse is allowed to roll an inherited IRA into their own when the other spouse passes away in addition to postpone the minimum distributions until they are 70 ½ years old. Unfortunately, this does not apply to couples that are unmarried, and the best option is to name the partner as the beneficiary to the IRA account. While the partner cannot escape taxes entirely, taxes can be minimized by rolling an account into an inherited IRA and taking distributions based on life expectancy.

In the age of the internet, concern must be paid to the digital assets in addition to the physical assets of your estate when you pass away. While there have been considerable issues with this in the past, social media companies are finally instituting policies to handle the social media of a person who has died. Some companies like Twitter and LinkedIn will deactivate or remove your social media account when they have been notified of the death, but other social media companies like Facebook are taking digital asset protection one step further.

Facebook Legacy Contact

The Facebook legacy contact is the company’s newest way of dealing with a deceased account holder’s social media page when they pass away. You can appoint a person as your legacy contact, and it can be anyone who also has an account with Facebook. That person is notified upon your death of their legacy status and given access to your memorialized social media page.

The legacy contact is not given full access but is able to share a final message on your profile, change the profile picture, and respond to any new friend requests. In addition, the legacy can download a copy of what you have shared on Facebook but cannot remove items from the timeline, read your messages sent to other friends, or remove any current friends from the page.

Digital Assets and Estate Planning

Digital assets are all of the personal property of a person that exists online. This includes photographs, money on internet accounts like Paypal or Dwolla, social media accounts, and blog posts. The main issue with digital assets and estate planning is that there is a lack of state or federal laws regulating the area. As a result, it can be difficult to appoint a representative to take custody and distribute the digital assets of a person’s estate. Despite the lack of regulatory guidance for digital assets, estate planners do recommend taking some steps to ensure that your digital assets are protected in your estate plan.

Companies such as PasswordBox, SecureSafe, and EstateMap help keep all of the information about your digital assets safely in one place. The account keeps track of all user names, passwords, security questions, and authorized users for the accounts. If you do not feel comfortable placing all of this information online in one place, keep track of all of your digital assets in a notebook or other non-digital format. The person or people that you entrust with your digital assets after you pass away will have a much easier time tracking down and managing your assets if you collect all of that information now.

Some people are making copies of most of their digital assets like photographs, videos, blog posts, emails, music, and social media sites to an external hard drive, cloud, or personal computer and leaving instructions with how to access all of the digital assets in the estate plan. If you place the assets in something tangible like a hard drive it can be easier to pass along those digital assets to a loved one within a will or other estate planning document.

Celebrity estate stories are rife with lessons about mistakes to avoid when creating an estate plan, such as problems with the estates of James Gandolfini, James Brown, and Anna Nicole Smith. Poor estate planning can lead to probate, taxes, and family disputes. Failing to create an estate plan or drafting a poorly written plan can lead to many issues for your loved ones after you pass away, but there are some mistakes that you can avoid in order to minimize the chances of problems in the estate planning process.

Mistake #1: Thinking You are Too Young or Possess Too Little

In 2012, a report from Texas Tech University revealed that only around 54% of all Americans possess an estate plan. Many do not create a will or other estate planning documents because they believe that they are too young or do not possess enough to warrant a will. However, a good estate plan does not just pass your assets to your loved ones when you die; it can also protect you while you are alive.

An estate plan names people to help you and make decisions if you ever become incapacitated. You can also assign guardianship for children or pets in an estate plan. If you wish for someone other than a spouse or children to inherit, a will is crucial. Even a simple estate plan involving a will and durable power of attorney forms can protect you and your loved ones during your life and after death.

Mistake #2: Placing Everything in Joint Ownership

Some people believe that placing property in joint ownership displaces the need for an estate plan. In joint ownership, the right of survivorship means that if one owner dies the other owns the property in full. However, joint ownership of property also opens that property to the possibility of the co-owner facing lawsuits, financial difficulty, or a divorce.

Mistake #3: Forgetting What a Will Does Not Do

A will does not always have the last say for certain assets in an estate. It is important to remember that accounts that name beneficiaries, like retirement accounts, life insurance, and bank accounts go to the named beneficiary, despite what a will might say. You should also review the beneficiary designations every few years to ensure that they stay up to date.

Mistake #4: Ignoring Family Problems

When you pass away, the last thing that you want to have happen is your loved ones fighting over you estate. While sometimes the dispute is over the amount inherited, but oftentimes the fights are about sentimental personal possessions. One of the easiest ways to avoid this issue is to sit down with you family while you are making your estate plan and discuss what each person should expect. You can also use the time to explain any decisions that you are making with your estate, or ask your loved ones if they have any special requests for items in your estate.

If you do not feel comfortable having a face-to-face talk, consider leaving a letter with your estate plan that explains your decisions. Simply understanding why can alleviate a lot of family strife when it comes to inheritance.

The White House has come forward and stated that President Barack Obama’s advisers would recommend that he veto pending bill, authored by Republicans, which would repeal the federal estate tax. A veto on the bill could happen as soon as Thursday, although experts believed that it stood little chance of becoming law. Democrats in the federal legislature and other lobbying groups all disagree with the repeal of the federal estate tax because of the damage that it would cause to the federal deficit.

Repealing the Estate Tax

Known by its opponents as a “death tax,” the federal estate tax reaches as high as forty percent on estates valued at more than the federal exemption level, $5.43 million for 2015. The tax is applied to the value of the estate that passes the $5.43 million mark unless it is protected through other estate planning means like trusts, retirement accounts, and the like. Proponents of the bill repealing the federal estate tax claim that it only serves to unduly burden grieving family members. However, the White House has said in a statement that it disagrees.

One of the biggest supporters of repealing the estate tax, Representative Steve Scalise, has gone on record as saying that this bill would help small business owners and family farms that require significant resources to shield their holdings from estate tax. “It takes away from their ability to grow their business to actually create jobs in this country.”

Arguments Against the Bill

According to White House experts, repealing the estate tax is “fiscally irresponsible” that would “endorse the principle that the wealthiest Americans should not have to pay tax on certain forms of income at all.” In addition, the Joint Committee on Taxation reported that if the bill was passed as law it would add a total of $269 billion to the federal deficit over the next ten years.

In regards to the Republicans’ argument for helping small businesses and family farms, reports show that a tiny fraction of Americans actually pay the federal estate tax. Only 0.2% of all American estates, around 5,400 in total, will pass the federal exemption level and be required to pay the federal estate tax this year. This bill does not apply to any state estate or inheritance taxes, which are passed individually by each state and have their own requirements attached to estates.

Democratic Senator Ron Wyden stated that “It’s ironic that my Republican colleagues are calling for a balanced budget and then in the same breath offering up a plan that would cost the government $269 billion in lost revenue over a decade.” The bill has led to more speculation that the Republican legislature is more concerned about protecting their own wealth and less concerned about the well-being of regular American citizens. Pushing for the repeal of the federal estate tax has also alienated wealthy Republicans from the less wealthy in their own political party.

The White House administration is pushing for legislation that would make it harder for retirement fund brokers to push higher fee mutual funds or other expensive products to people who are trying to save for retirement. The plan, issued by the federal Labor Department, would require brokers to act in the best interests of their clients, which is a change that could drastically affect the earnings of financial advisers in the handling of retirees’ funds.

Old Brokerage Rules

President Obama said that the current regulations regarding brokers are out of date and come from an age where employees could rely upon a pension from their employers. “Financial advisers absolutely deserve fair compensation,” the President said, “But they shouldn’t be able to take advantage of their clients.” Under the current rules, brokers can sell any financial product that they deem “suitable” for an investor, which means that it fits the client’s needs and financial risk.

The opposition has beaten other attempts to curtail brokers’ fees in the past, especially with more banks investing in more capital-intensive trading units. Finance groups say that the White House has distorted the issues and disregarded already tough laws on financial brokers that are enforced by both the Securities and Exchange Commission as well as the Financial Industry Regulatory Authority.

White House Proposed New Rules

This plan would impose a fiduciary duty on the brokers that would “crack down on backdoor payments and hidden fees.” The main gist of the proposal is an effort to tighten the legal standard that brokers have in handling retirement funds, accounts, and 401(k)’s. Currently, American retirees have more than $11 trillion in retirement funds.

The Labor Department plans on sending the proposed new rules to the Office of Budget Management and Review next week, but it could be several more months before the official details are released to the public. However, this will also give interested parties like the securities industry and lawmakers the chance to comment on the new rules before the final regulation is issued.

How a Broker Profits

Under the current rules, a broker earns money from the sales commission of financial products or through fees paid by investors in mutual funds. This incentivizes brokers to push the financial products that net the highest fees and not necessarily the highest gain for retirees. Because of this incentive structure, investors lose as much as $17 billion per year. “The corrosive power of fine print, hidden fees and conflicted advice can eat away like a chronic illness at people’s hard-earned retirement savings.”

The area where investors are most vulnerable to conflicts of interest with the brokers is when they are moving investments from a 401(k) or other employer sponsored account to an IRA. The brokers can steer investors into products that net the brokers higher fees, and the average IRA rollover for investors between the ages of 55 and 64 years old was over $100,000 in 2012.

When a couple is getting married the last thing that they are typically worried about is estate planning. However, once the honeymoon is over you should sit down with your new spouse and update your individual estate plans to reflect the new status of your marriage. The following tips are a good place to start when combining two individual estate plans into one.

Visit the HR Department

Nowadays, your employer typically handles your retirement accounts and life insurance forms. Once you have been married, you should visit your HR department to update the beneficiary forms for these documents to include your new spouse. Beneficiary accounts are different from other assets in an estate, so if the beneficiary is left as someone different the value of the account will go to them and not the spouse.

Update Life Insurance

After you are married, it is a good time to review the status of your life insurance needs. Some employment-based life insurance has a fairly low cap, so it may be necessary to look at other options for increasing the amount of your life insurance policy. If you are considering having children, you should factor that into your consideration now, when the premiums for life insurance are low.

Draft a Will

Even though you may not have accumulated that much wealth by the time you get married, you should still execute a basic will that leaves what assets that you do have to your spouse. Dying without a will, or intestate, leaves the estate in the hands of the state courts to distribute and not all states give the entire estate automatically to the spouse.

In addition, if a prenuptial agreement was signed prior to the marriage, the terms of that agreement should also be addressed in the will. Your estate plan should reflect the prenuptial agreement to ensure that it is carried out in the way that it was intended.

Create Durable Powers of Attorney Forms

Despite the fact that you are married, in the unfortunate case that you become in capacitated and cannot make decisions for yourself your spouse does not automatically get to make your decisions for you. In order to ensure that your spouse has the right to make legal, financial, and medical decisions on your behalf you should both execute durable power of attorney and advance directive forms. You should formally name your spouse as your decision maker in this event and name an alternate in the event where an accident incapacitates you both.

Discuss Home Ownership Documents

If you and your spouse bought a home prior to getting married, you need to sit down after the wedding and discuss the terms of home ownership. If only one person was named on the deed it may make sense to put the house in both names. Changing the ownership of the home to a joint tenancy or tenancy by the entirety (depending on where you live) can ensure that the home avoids the probate process.

Living and working abroad while maintaining your United States citizenship can add a layer of complexity to the estate planning process. International property, assets, accounts, taxation, and other issues that can affect estate plans must be considered that normally do not complicate the estate planning process. If you expect to be working as an expat, consider looking into the following issues for your estate plan before you go.

Review Your Estate Plan

It may seem basic, but review your estate plan before you go abroad. Update any necessary documents or beneficiary forms before leaving and make sure that everything is set with your attorney in the United States before going abroad. It would also be helpful to review the interactions between the U.S. legal system and the laws where you will be going to so that you can understand how your estate plan may be affected by the move.

Understand Domicile and Residence Laws

For expatriates, it is very important that you understand the difference between a domicile and a residence. In some cases, documents drafted in one country do not comply with the laws in another. The creation of trusts within an estate has been known to cause serious problems with foreign taxes, so it is important to establish through your estate plan that the United States is still considered to be your domicile.

You can change your residence without needing to change your domicile, and you can only have one domicile at a time, whereas you can have multiple residences at once. Domicile and residence rules can have a massive effect on your estate plan.

Look Out for Double Taxation

If you have property, assets, accounts, or other things of value in more than one country there is the possibility that multiple countries will claim taxes on the estate. There are agreements with some countries that prevent double taxation, but it is a good thing to check on before you go abroad.

Be Careful with Foreign Life Insurance

Consider purchasing life insurance from a United States company before you go abroad. It can be incredibly difficult to purchase life insurance from a U.S. company once you are residing in a foreign country. Furthermore, purchasing life insurance from a foreign country might not conform to U.S. laws. It can result in the policy being denied outright in the U.S. or subject it to very unfavorable tax treatment.

Review Foreign Estate Disposition Laws

The United States probate system is known for letting people dispose of their property however and to whomever they see fit. However, in many civil law countries the courts compel the estate to be distributed under their “forced heirship” principles. This means that children inherit the assets of the family upon the first parent’s death, and spouses are not typically considered when distributing the estate. However, some civil law countries have amended their laws to allow for a person to distribute their estate according to the laws of their domicile, but it must be made explicit in your will.

A lot of people who are saving for retirement prefer to use Roth IRAs as part of their retirement plan. This after-tax income can go a long way in retirement, but annual contribution limits can place a constraint on how much money can be saved. Fortunately, there are “back door” options for funding a Roth IRA that get around the contribution limits and allow the account to grow more quickly. One of the fastest growing back door options is using the funds in an employer-sponsored 401(k).

401(k) to Roth IRA Strategies

An employer-sponsored 401(k) account is mainly used to defer the traditional pre-tax contribution limit. For 2015, the limit is $18,000 or $24,000 for employees over the age of fifty years old. However, some 401(k) account holders have started to use the after-tax contribution limit as a way to contribute to a Roth IRA. This system works because the after-tax limit for a 401(k) allows the client to defer money than the pre-tax limit, which for 2015 is a total of $53,000.

The IRS has also made it easier for employees to fund a Roth IRA with funds from a 401(k) by treating the 401(k) distribution as a single distribution, despite having both pre-tax and after-tax contributions mixed together. This rule even applies if the 401(k) distribution will be rolled into different accounts so long as the 401(k) distribution is made all at once.

Employees that can contribute more than the pre-tax contribution and can also give after-tax contributions can then “overfund” a Roth IRA at a later time. The after-tax contributions can be separated and rolled into a Roth IRA when the employee exits the employer-sponsored plan without any tax liability. However, in order to roll the entire 401(k) into a Roth IRA you must move the entire 401(k) balance into a new account.

Practical Concerns

There are a couple of issues with using a 401(k) to fund a Roth IRA that you should be cognizant of. First, making an after-tax contribution to a 401(k) is different than making a normal contribution to a Roth IRA. For a Roth IRA, contributions are limited to a pre-tax amount, and earnings in that account grow tax-free whereas after-tax contributions are only made tax-deferred.

In addition, earnings on after-tax contributions do not begin to generate tax-free growth until they are rolled into the Roth IRA. However, by making these types of contributions, you can indirectly fund a Roth IRA more than what you could through the maximum contribution limits for that type of account.

Finally, you should check to see whether your employer allows for back-door funding of Roth IRAs through a 401(k). Some employer plans do not allow after-tax contributions so it is important to check before you start making transfer plans for the two types of accounts. However, if it is allowed, over funding a Roth IRA through a 401(k) can be a great, tax-free way to fund your lifestyle after retirement.

In a bizarre care, a woman in New Hampshire admitted in court that she told police that she dug up her father’s grave in search of his “real will” but was rewarded with only vodka and cigarettes. Melanie Nash, 53, pleaded guilty last week as one of four people who opened her father’s vault and rifled through his casket last May.

According to the prosecutor, the scene was reminiscent of an Edgar Allen Poe tale. Ms. Nash believed that she was unjustly shorted out of her part of her father’s estate when he died in 2004. She did not receive anything when he died and had been thinking of digging up her father’s grave for years to try and prove that her sister hid the will in his casket. Her sister, Susie Nash, has always maintained that there was only one will created in 1995 along with the rest of the estate planning documents and that everyone involved in the process knew about it.

In Search of the Real Will

Melanie Nash gave a written statement to police last June admitting that she met up with three other people at the cemetery last May and that “All this was done for the right reasons and I know my father would be OK with it.” She then added that “What we all did was to dig up my father’s coffin, Eddie Nash, looking for documents. We did it with respect.” Two of the three other people pleaded guilty to their offenses and the third was acquitted.

Ms. Nash’s attorney claimed that the statement was inadmissible because the statement was given before her Miranda rights were read, but the judge ruled that the statements were given freely to the police after a warrant had been issued for her arrest and she voluntarily gave the statements. She was supposed to go to trial in March but instead pleaded guilty to charges of criminal mischief, interference with a cemetery, conspiracy and abuse of a corpse.

Her father, Eddie Nash, died of a heart attack in 2004 at the age of 68. He was the founder of an equipment business in 1979 that is still run by his family today. Melanie Nash’s sister Susie told the media that since the incident her father has been reburied. Melanie Nash will face sentencing for her crimes on May 5.

Estate Planning Lessons

There are a few important takeaway lessons from this story regarding estate planning. First and foremost is the importance of communication. It is important to communicate with everyone who may be affected by your will and estate plan to know that you are drafting a will. Second, it is equally important to communicate with family members or others who expect to share in the estate but have been written out. It can be an uncomfortable conversation, but it can avoid awkward situations like this one later down the road. Finally, review the estate plan with everyone that is involved, and if you make any updates or changes to the estate be sure to communicate that with others so that there are no surprises when the estate is distributed.

Contact Information