Overview. The Federal Insurance Contributions Act (FICA) imposes two taxes on employers, employees, and self-employed workers—one for Old Age, Survivors and Disability Insurance (OASDI; commonly known as the Social Security tax), and the other for Hospital Insurance (HI; commonly known as the Medicare tax).

Before passage of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the 2010 Tax Relief Act, P.L. 111-312), the FICA tax rate for employees and employers was 7.65% each—6.2% for OASDI and 1.45% for HI. Under the SECA tax, self-employment income of self-employed taxpayers was subject to a tax of 15.3%—12.4% for OASDI and 2.9% for HI. There is a maximum amount of compensation subject to the OASDI tax (the wage base), but no maximum for HI. (The wage base is $106,800 for 2011 and $110,100 for 2012.) Similar rules apply under the Railroad Retirement Tax Act (RRTA).

Under pre-2010 Tax Relief Act law, for computing the income tax of an individual, Code Sec. 164(f) allowed an above-the-line deduction equal to 50% of the amount of the SECA tax imposed on the individual’s self-employment income for the tax year.

Under Code Sec. 1402(a)(12), a taxpayer is allowed a deduction in computing net earnings from self-employment equal to: (1) net earnings from self-employment as determined before taking the Code Sec. 1402(a)(12) deduction into account, multiplied by (2) one-half the sum of the OASDI tax rate and the HI tax rate. This deduction is allowed in computing net earnings from self-employment in lieu of the Code Sec. 164(f) above-the-line deduction of one-half of the self-employment tax. Thus, the Code Sec. 164(f) deduction can’t be taken in computing self-employment tax liability. The Code Sec. 1402(a)(12) deduction is designed to put the self-employed in the same position as employees in that they don’t have to pay self-employment tax on about half of the amount of the tax itself.

Temporary tax cut for 2011. For remuneration received during 2011, the 2010 Tax Relief Act reduced the employee OASDI tax rate under the FICA tax by two percentage points to 4.2%. Similarly, for self-employment income for tax years beginning in 2011, the Act reduced the OASDI tax rate under the SECA tax by two percentage points to 10.4% percent. As a result, for 2011, employees pay only 4.2% Social Security tax on wages up to $106,800 and self-employed individuals pay only 10.4% Social Security self-employment taxes on self-employment income up to $106,800.

The 2010 Tax Relief Act provided rules for coordination with deductions for employment taxes, as follows.

The Code Sec. 164(f) income tax deduction allowed for tax years beginning in 2011 is computed at the rate of 59.6% of the OASDI tax paid, plus one half of the HI tax paid.

A new percentage (59.6%) replaces the rate of one half (50%) allowed under pre-2010 Tax Relief Act law for this portion of the deduction. The new percentage is necessary to continue to allow the self-employed taxpayer to deduct the full amount of the employer portion of SECA taxes. The employer OASDI tax rate remains at 6.2%, while the employee portion falls to 4.2%. Thus, the employer share of total OASDI taxes is 6.2 divided by 10.4, or 59.6% of the OASDI portion of SECA taxes.

However, the two-percentage-point reduction is not taken into account in determining the Code Sec. 1402 SECA tax deduction allowed for determining the amount of the net earnings from self-employment for the tax year.

New law. Under the TTCA, the reduced employee OASDI tax rate of 4.2% under the FICA tax, and the equivalent employee portion of the RRTA tax, is extended to apply to covered wages paid in the first two months of 2012. (Sec. 601(c) of the 2010 Tax Relief Act (P.L. 111-312), as amended by TTCA Sec. 101)

The TTCA also provides for a recapture of any benefit a taxpayer may have received from the reduction in the OASDI tax rate, and the equivalent employee portion of the RRTA tax, for remuneration received during the first two months of 2012 in excess of $18,350 (i.e., two-twelfths of the 2012 wage base of $110,100). (Sec. 601(g) of the 2010 Tax Relief Act (P.L. 111-312), as amended by TTCA Sec. 101) The recapture is accomplished by a tax equal to 2% of the amount of wages (and railroad compensation) received during the first two months of 2012 that exceed $18,350.

M&Q observation: A highlight of the TTCA issued by the House Ways & Means Committee on December 22, indicates that the recapture provision would apply only if the temporary payroll tax cut ends on Feb. 29, 2012. A House-Senate Conference will convene soon to consider extending the temporary payroll tax cut for the remainder of 2012.

For tax years beginning in 2012, the TTCA provides that the OASDI rate for a self-employed individual remains at 10.4%, for self-employment income of up to $18,350 (reduced by wages subject to the lower OASDI rate for 2012). (Sec. 601(f) of the 2010 Tax Relief Act (P.L. 111-312), as amended by TTCA Sec. 101) Related rules for 2011 concerning coordination of a self-employed individual’s deductions in determining net earnings from self-employment and income tax also apply for 2012, except that the income tax deduction allowed for the OASDI portion of SECA tax paid for tax years beginning in 2012 is computed at the rate of 59.6% of the OASDI tax paid on self-employment income of up to $18,350. For self-employment income in excess of this amount, the deduction is equal to half of the OASDI portion of the SECA tax paid. The Joint Committee on Taxation explanation of the TTCA says that the 59.6% used for the first $18,350 of self-employment income is necessary to continue to allow the self-employed taxpayer to deduct the full amount of the employer portion of SECA taxes. The employer OASDI tax rate remains at 6.2%, while the employee portion falls to a 4.2% rate for the first $18,350 of self-employment income. Thus, the employer share of total OASDI taxes is 6.2% divided by 10.4, or 59.6% of the OASDI portion of SECA taxes, for the first $18,350 of self-employment income.

Effective date. The above TTCA changes are effective for remuneration received during the months of January and February in 2012 and for self-employment income for tax years beginning in 2012. (TTCA Sec. 101(c)).

1. Fate of Bush-era tax cuts unresolved

2011 ended without any resolution of the fate of the Bush-era tax cuts. The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (2010 Tax Relief Act) extended the Bush-era tax cuts through 2012. President Obama and House Speaker John Boehner, R-Ohio, reportedly came close to an agreement in August 2011 to extend some of the Bush-era tax cuts as part of a comprehensive deficit reduction package. When their agreement fell apart, many Washington observers predicted the Joint Select Committee on Deficit Reduction would address the Bush-era tax cuts in a deficit reduction package. The Deficit Reduction Committee announced in November that it failed to reach an agreement and disbanded.

Comment

The fate of the Bush-era tax cuts may ultimately be decided by the lame-duck Congress, which will meet after the November 2012 elections. The outcome of the presidential election and which party controls the House and Senate will undoubtedly influence whatever decision lawmakers take over the Bush-era tax cuts.

2. Rollback of tax legislation

Congress repealed three tax laws in 2011: expanded business information reporting, real property expense reporting and three percent government withholding.

Business information reporting. The Patient Protection and Affordable Care Act (PPACA) required businesses, charities and government entities to file information returns (Forms 1099) for all payments of $600 or more in a calendar year to a single vendor, other than a tax-exempt vendor. The PPACA also repealed the long-standing reporting exception for payments made to corporations. The PPACA’s expansion of business information reporting proved universally unpopular. Congress passed the Comprehensive 1099 Taxpayer Protection Act in April 2011. The Comprehensive 1099 Taxpayer Protection Act repeals the expanded business information reporting provisions in the PPACA as if they have never been enacted.

Rental property expense reporting. The Small Business Jobs Act of 2010 required landlords to file a Form 1099 to report certain rental property expense payments of $600 or more. The Comprehensive 1099 Taxpayer Protection Act also repealed rental expense reporting as if it had never been enacted.

Government withholding. The Tax Increase Prevention and Reconciliation Act of 2007 imposed three percent withholding on payments for goods or services to contractors made by federal, state and local governments. In November 2011, President Obama signed the 3% Withholding Repeal and Job Creation Act, which repeals three percent government withholding as if it had never been enacted.

3. Foreign accounts

The Treasury Department and the IRS continued to focus on foreign account reporting in 2011. Three developments were interconnected: implementation of the Foreign Account Tax Compliance Act (FATCA), FBAR filings and the 2011 Offshore Voluntary Disclosure Initiative (OVDI).

FATCA. The IRS continued to implement the Foreign Account Tax Compliance Act (FATCA) in 2011. FATCA generally requires certain U.S. taxpayers holding specified foreign financial assets to report information about these assets on a new form to be attached to the taxpayer’s return. Additionally, foreign financial institutions must report certain information about accounts held by U.S. taxpayers. In July 2011, the IRS announced it intended to provide for a phased implementation of the FATCA requirements for foreign financial institutions. In December 2011, the IRS issued guidance about new Form 8938, Statement of Specified Foreign Financial Assets.

FBAR. The Treasury Department issued final rules on Form TD-F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR) in February 2011. The final rules retain and clarify the requirement to report signature or other authority over a foreign financial account. The final rules also reserved the treatment of investment companies other than mutual funds or similar pooled funds. In related news, the Treasury Department announced that taxpayers may electronically file the FBAR; previously, electronic filing was not an option for the FBAR.

OVDI. The IRS launched a campaign in 2011 to encourage taxpayers to voluntarily disclose unreported offshore accounts. The 2011 Offshore Voluntary Disclosure Initiative (OVDI) rewarded taxpayers who came forward voluntarily with a reduced penalty framework (although not as generous as a similar program in 2009). The 2011 OVDI closed on September 9, 2011. In December, IRS Commissioner Douglas Shulman reported that the agency has received more than 33,000 voluntary disclosures since 2009.

4. IRS help for distressed taxpayers

The IRS announced in February 2011 a series of measures intended to help good-faith taxpayers who cannot meet their tax obligations. The IRS “Fresh Start” initiative generally allows lien withdrawals for taxpayers entering into direct debit installment agreements (and for taxpayers who convert from a regular installment agreement to a direct debit agreement). The IRS also announced it would make streamlined installment agreements available to more small businesses. Qualified small businesses with $25,000 or less in unpaid taxes can participate in the streamlined installment agreement program.

Comment

According to Commissioner Douglas Shulman and other top agency officials, IRS personnel have been instructed to be more flexible in helping distressed taxpayers.

5. Worker classification

The IRS launched a new program in September 2011 to enable employers to voluntarily reclassify their workers for federal employment tax purposes and take advantage of a reduced penalty framework. The Voluntary Classification System Program (VCSP) is open to employers currently treating their workers as independent contractors or other nonemployees and who want to prospectively treat the workers as employees. The employer must not be under audit and satisfy other requirements. The IRS has not announced an end-date to the VCSP.

6. Basis overstatement regs

The Supreme Court agreed in September 2011 to resolve a split among the federal courts of appeal over IRS regs (TD 9515) that impose a six-year limitations period on assessments due to overstated basis (Home Concrete & Supply, LLC, 2011-1 ustc ¶50,207). The government asked the Supreme Court to decide, among other questions, whether an understatement of gross income attributable to an overstatement of basis in sold property is an omission from income that can trigger the six-year assessment period.

Comment

In March 2011, the Court of Appeals for the Federal Circuit upheld the basis overstatement regs under Chevron-deference (Grapevine Imports, Ltd., 2011-1 ustc ¶50,264).

7. Mid-year mileage rate increase

For the third time in six years, the IRS announced a mid-year adjustment to the business standard mileage rate because of rising gasoline prices. The business standard mileage rate increased from 51 cents-per-mile to 55.5 cents-per-mile for the second half of 2011. The medical/moving standard mileage rate increased from 19 cents-per-mile to 23.5 cents-per-mile for the second half of 2011. Congress did not make a mid-year adjustment to the charitable standard mileage rate, which remained at 14 cents-per-mile for the second half of 2011.

Comment

For 2012, the business standard mileage rate is 55.5 cents-per-mile and the medical/moving standard mileage rate is 23 cents-per-mile. The statutorily-determined charitable standard mileage rate remains at 14 cents-per-mile for 2012.

8. Return preparer oversight

The IRS moved forward with its return preparer oversight initiative in 2011, defining the new designation “registered tax return preparer” and launching the registered tax return preparer competency examination. In June, the IRS issued final Circular 230 regulations, which clarified professional standards for certified public accountants (CPAs), enrolled agents (EAs) and registered tax return preparers. The IRS also fine-tuned its online preparer tax identification number (PTIN) registration system. Additionally, the IRS announced it would revisit its proposal to fingerprint certain PTIN applicants; a proposal which many tax professionals criticized as duplicative of their own employee background checks and too costly.

9. Mandatory e-file for preparers

Beginning January 1, 2011, specified tax return preparers who reasonably expected to file 100 or more covered returns in calendar year 2011 were required to file those returns electronically. The e-filing requirement was put in place by Congress in 2009. The IRS phased-in the requirement over two years (2011 and 2012). For calendar year 2012 (and subsequent years), the threshold for mandatory e-filing by specified tax return preparers is 11 or more covered returns. Firms must compute the number of covered returns in the aggregate that they reasonably expect to file as a firm. If the number is 11 or more in calendar year 2012 and subsequent years, all members of the firm must electronically file covered returns.

10. Updated PAL rules

The IRS issued proposed regs in November 2011 updating the definition of an interest in a limited partnership as a limited partner for purposes of the Code Sec. 469 passive activity loss (PAL) rules. Under the proposed regs, an interest in a limited liability company is treated as a limited partnership interest for the PAL rules.

Comment

The proposed regs reflect the evolution of the rules for limited partners since passage of the Uniform Limited Partnership Act of 1916.

Honorable mention

• Congress bans tax strategy patents;
• IRS helps organizations regain tax-exempt status after automatic revocation;
• IRS responds to Hurricane Irene and many other natural disasters in 2011;
• FUTA surtax expires mid-year;
• Congress expands Work Opportunity Tax Credit (WOTC) for veterans;
• Supreme Court agrees to hear arguments on PPACA;
• IRS issues final regs on Code Sec. 6707A penalty.

Spousal Benefits

Spouses are entitled to benefits if the marriage lasted at least 10 years. A spouse is entitled to an amount equal to one-half of the worker’s full retirement benefit. To receive this benefit, you must be at your full retirement age or caring for a child who is under 16 years old. In addition, your spouse must have filed for Social Security retirement benefits even if he or she isn’t receiving them.

If you could receive more from Social Security based on your own earnings record than through the spousal benefit, the Social Security Administration will automatically provide you with the larger benefit. If you have reached your full retirement age, you may also elect to receive spousal benefits and delay taking your benefits, allowing your own delayed retirement credits to accrue, and switch to your own benefit at a later date. However, you cannot elect to receive spousal benefits below your retirement age and later switch to your own benefits.

If you begin collecting your spousal benefit before your full retirement age, your spousal benefit will be permanently reduced.  But if your spouse retires early, but you wait until your full retirement age, you will still receive benefits based on one-half of his or her full retirement benefit.  

For more from the Social Security Administration on spousal benefits, click here.

Divorced spouses

An ex-spouse is also entitled to receive one half of the worker’s full retirement benefit as long as the marriage lasted at least 10 years. Unlike a current spouse, a divorced spouse can begin receiving benefits even before the worker has applied for benefits. The worker must be at least 62 years old and the divorce must have been final for at least two years.

For more from the Social Security Administration on qualifying for divorced spouse benefits, click here.

Survivor Benefits

If you are a surviving spouse at full retirement age, you are entitled to the worker’s full retirement benefits. If the worker delayed retirement, the survivor’s benefit will be higher. Survivors are entitled to benefits even if they are divorced as long as they had been married for at least 10 years. If you file for benefits before you are over age 60, but below full retirement age, you will receive a reduced percentage of the worker’s benefits. Surviving spouses who are younger than 60 receive benefits only in limited circumstances, such as cases of disability or caring for a disabled child.

For more from the Social Security Administration on the requirements for survivor benefits, click here.

A trust is a legal arrangement through which one person (or an institution, such as a bank or law firm), called a “trustee,” holds legal title to property for another person, called a “beneficiary.” If you have been appointed the trustee of a trust, this is a strong vote of confidence in your judgment.

A trustee’s duties include locating and protecting trust assets, investing assets prudently, distributing assets to beneficiaries, keeping track of income and expenditures, and filing taxes. (For more information on a trustee’s duties, contact estate planning attorney Jill E. Sugarman) As a trustee, you have a fiduciary duty to the beneficiaries of the trust, meaning that you have an obligation to act in the best interest of the beneficiaries at all times. It also means you will be held to a higher standard than if you were just dealing with your own finances.

A trustee is usually entitled to hire an attorney (and other professionals like an accountant) to assist in trust administration. The attorney’s fees will be paid from the trust funds. While hiring an attorney will cost money, not having an attorney at all could cost a trustee much more if errors are made.

A trust can be administered without court involvement, but that doesn’t mean that the administration is simple. There are many areas where problems can arise — for example, if assets aren’t invested properly, taxes are late, or if proper records aren’t kept. If something goes wrong during the administration of the trust, the trustee can be removed and held personally liable for any costs incurred or losses suffered. Even if a spouse is the trustee, he or she should still consult with an attorney. Many couples have so-called “AB” trusts to take advantage of the maximum estate tax exemption; these trusts require special knowledge to determine whether the trusts are properly funded and the taxes filed. 

For more information about trusts, contact estate planning attorney Jill E. Sugarman, at JSugarman@McLaughlinQuinn.com or by phone at 401-421-5115 ext. 215.

The study, published in the October 5, 2011, issue of the Journal of the American Medical Association, found that in regions of the U.S. that tend to spend the most on end-of-life care, patients who have “advance directives” cost Medicare about $5,600 less per person.  (Advance directives allow patients to communicate their end-of-life wishes if they are unable to do so themselves.)  These patients’ quality of life also appeared to be better; they were more likely to receive hospice care and to be at home when they died.

But the differences in spending and care did not hold up in regions of the country with low- to average end-of-life expenditures.  The researchers speculated that in these areas, less aggressive care at the end of life is already the norm and more in line with what many patients want.  In high-spending regions, by contrast, an advance directive may embolden caregivers to go against the local norm of aggressive treatment and prolonged hospital care.   In 2006, treatment during the last year of life accounted for more than one-quarter of Medicare expenditures.  

Advance directives typically include a “living will” that gives instructions regarding treatment if the individual becomes terminally ill or is in a persistent vegetative state.  It may contain directions to refuse or remove life support in the event the individual is in a coma or a vegetative state, or it may provide instructions to use all efforts to keep the person alive, no matter the circumstances.  Most participants in the study who had advance directives specified that they wanted to limit treatment.

“[The study] absolutely highlights some of the reasons why you should both talk to family, friends and physicians about the type of care you might want to receive, should you be unable to make your own decisions,” said Lauren Hersch Nicholas, the study’s lead author and a health economist at the University of Michigan.

Second Study: Aggressive Treatment Doesn’t Prolong Life

A related study just published in the medical journal The Lancet has found that nearly one of every three Medicare beneficiaries had an operation in their last year of life. 

Operations were more likely in regions with a greater availability of hospital beds and higher levels of Medicare spending.  But the higher rates of surgery didn’t necessarily pay off.  The regions where doctors were more likely to operate had higher patient death rates.

“This level of surgical intensity doesn’t seem to be having much in the way of benefit for the population,” Dr. Ashish Jha, the study’s author and an associate professor of health policy at the Harvard School of Public Health, told ABC News. “Our sense is that there are probably lots of unnecessary procedures that go on at end of life.”

Each state has its own laws on advance directives.  Caring Connections, a site run by the National Hospice and Palliative Care Organization, offers state-by-state information on advance directives

Advance medical directives are an integral part of the estate planning services provided by elder law attorneys.  To speak with a qualified elder law attorney  and for more on health care decision-making, contact elderlaw attorney Jill E. Sugarman at 401-421-5115 ext. 215 or by e-mail at JSugarman@McLaughlinQuinn.com.

According to the AARP, the Federal Trade Commission (FTC), and a number of state attorneys general, these high-pressure con artists have built an industry around older people’s fears that their estates could be eaten up by probate costs or taxes, or that the distribution of their assets could be delayed for years. The solution, they claim, is a living trust.

“What these fast-talking crooks don’t tell their clients,” AARP Volunteer Consumer Affairs Specialist Irma Swantner says, “is that the “living trust” they’re selling could become the buyer’s “living hell.”

The living trust is an estate planning device that eliminates the need for probate of the individual’s estate at his death. Assets are held in the trust and then distributed outside of probate at the time of death.

There is nothing wrong with a living trust or with trying to avoid probate. Attorneys may recommend a living trust as an estate planning device for some of their clients where it is appropriate for their particular needs. However, salespeople masquerading as professional estate planners are working the provinces trying to convince older Americans that such trusts are for everyone. Going door-to-door or using phone solicitation, they often greatly exaggerate the costs and delays of probate and are unlikely to mention that the vast majority of estates are not subject to federal or state estate taxes. Their products are “cookie-cutter” living trusts, sometimes in the form of living trust kits.

The problem is that many people don’t need a living trust, a trust from a kit may not meet a particular client’s needs, and often these companies charge more than the service is worth. In addition, according to the FTC, some companies are using the living trust concept merely as a way to gain access to consumers’ financial information and sell them other financial products, such as insurance annuities.

Among the dangers of “one-size-fits-all” living trusts, say AARP officials, is that in many cases they won’t make the grantor and spouse eligible for Medicaid reimbursement of nursing home costs. In addition some trusts improperly instruct the trustee to distribute property to beneficiaries immediately upon the death of the grantor. If creditors make a claim against the trust after asset distribution, the trustee becomes personally liable for any valid claims against the trust.

According to an AARP study published in 2000, about four million people older than 50 with less than $25,000 in annual income may have purchased costly, unnecessary, and potentially dangerous living trusts as a result of high-pressure sales tactics by firms masquerading as AARP affiliates. In fact, AARP is not associated with and does not endorse any company that markets or sells living trusts.

The Federal Trade Commission also reminds consumers of the “Cooling-Off Rule,” which provides that if you buy a living trust in your home or somewhere other than the seller’s permanent place of business (say, at a hotel seminar), the seller must give you a written statement of your right to cancel the deal within three business days.

To help older adults and families make better decisions about annuities, the Healthcare and Elder Law Programs Corporation (H.E.L.P.) has created a Web site, annuitytruth.org.

Or, better yet, seek the advice of a qualified elder law attorney, such as Jill E. Sugarman, before signing anything. You can contact Jill at 401-421-5115 ext. 215 or by e-mail at JSugarman@McLaughlinQuinn.com.

Where to keep a will
The safest place to keep the original copy of your will is in a bank safe deposit box, but it may not always be the most practical. If the will is in a safe deposit box, it may be difficult for your family to access the box after you die. A better option may be to keep it at home in a fire-proof safe. Just make sure your family members know how to open the safe.

Some attorneys may keep the original copy of the will. But if you leave the will with your attorney, make sure the attorney receives updated contact information from you when you move. That way if the attorney moves offices or retires, he or she will know where to find you and you will know where your will is.

If you do use a safe deposit box or your attorney’s office, you may want to keep a copy of your will at home with your other financial documents. It is usually not a good idea to give a copy to family members or friends because you may want to change the distributions at some point and may need the will back.

What do you do with an old will?
Once you have written a new will, your inclination may be to destroy the old will, but this may not be a good idea. If, for some reason, your new will is invalidated, the court may be willing to reinstate an old will rather than allowing your estate to pass intestate (according to state law). It is likely that your old will adheres more closely to your wishes than an intestate distribution. If the will is destroyed, it cannot be reinstated.

On the other hand, if you have made a major change in your will, by all means destroy the old one. Otherwise, someone who did better under the old will may argue that you were incompetent or under undue influence when you executed the new will. Also, their feelings may be hurt if they see a change in your sentiments towards them.

Making changes to a will
If you want to make changes to a will, do not mark up the will by hand, even if you have only small changes to make. A court could take a marked-up will as a sign that you intended to revoke the will. If you want to make a change, contact an attorney who can draft an amendment to the will (called a codicil).

For more information on estate planning, contact estate planning and elderlaw attorney Jill E. Sugarman at 401-421-5115 ext. 215 or by e-mail at JSugarman@McLaughlinQuinn.com.

• Take an inventory. The first thing you and your partner should do is each take an inventory of your assets and debts and share it with the other person. Don’t forget to include life insurance policies and retirement plans in your inventories. It is important to be open and honest about money if you want to prevent bad feelings in the future.
• Decide how you want to handle finances. Once you know what you are dealing with, then you need to decide if you want to combine (or not combine) assets when you are married. For example, if one partner is selling a house and moving in with the other partner, will he or she contribute to the cost of the house? If one partner has significant debt, you may not want to combine finances or make any joint purchases. These decisions need to be made upfront so everyone is clear on what to expect.
• Decide what you want to happen when you die. You and your future spouse need to figure out where each of you wants your assets to go when you die. If you have children from a previous marriage, this can be a complicated discussion. There is no guarantee that if you leave your assets to your new spouse, he or she will provide for your children after you are gone. There are a number of options to ensure your children are provided for, including creating a trust for your children, making your children beneficiaries of life insurance policies, or giving your children joint ownership of property. Even if you don’t have children, there may be family heirlooms or mementos that you want to keep in your family. Again, open discussions can prevent problems in the future.
• Consult an elder law or estate planning attorney. Even if you don’t have a lot of assets, you should consult an attorney, especially if you have children. You will definitely need to update your will. You may also need to update or create other estate planning documents such as a durable power of attorney and a health care proxy. If you have significant assets, a prenuptial agreement may be appropriate. In addition, the attorney can help you decide if a trust is necessary to protect your children’s interests.
• Change your beneficiaries. You may want to change the beneficiaries on your life insurance policy, annuity, and/or retirement plan. If you are divorced, however, you may not be able to change some of the beneficiaries. Bring your divorce decree with you to the attorney so he or she can make sure you do not violate the decree. If you can’t change your beneficiaries, you may want to buy additional life insurance or retirement plans that will include your new spouse.
• Consider a prenuptial agreement. While you are intending to stay married, things happen. Unlike a first marriage, you may be bringing property to this marriage that you spent decades accumulating and you may be merging two families. You need to decide together what your intentions are for the use of funds while you are living together, if you get divorced and when one of you dies before the other. Failure to think and plan ahead can mean severe heartache and financial costs for you and your family.
• Consider purchasing long-term care insurance.The physical, emotional and financial cost of long-term care can deplete the savings of all but the most wealthy. While you may be willing to spend your lifetime of savings on the care of a spouse with whom you raised a family and accumulated the funds, you may not want to lose this to the care of a relatively new spouse. Long-term care insurance, while expensive, can permit you and your new spouse to get the care you need without impoverishing the other.

The most important thing to remember is to be open and honest with your future spouse and your family members about your wishes.

For more information on estate planning, please contact Jill E. Sugarman, Esq. at JSugarman@McLaughlinQuinn.com or by phone at 401-421-5115 ext. 215.