Estate Planning for Boomers in 2010

By on October 23, 2010

While the need for estate planning, including wills or trusts, for Boomers (of whom I’m a card carrying member) is the same as it is for individuals of all ages, there are a few identifiable trends that seem particularly relevant to Boomers.

Blended families. It has become increasingly common in my practice to work with clients who are in their second and third marriages, and with children from prior marriages to consider in the estate planning process.   It’s also increasingly common to work with couples in long term relationships without being married. Each of these situations can add a level of complexity to the estate planning process, since there must be a balancing of the interests of the second spouse or significant other and the interests of children from the prior marriage or relationship.

State law governing the rights of a spouse to inherit must also be considered and explained.   For example, it often comes as a surprise to couples to learn that if they died without a will their spouse would only have a right to inherit one third of their estate if the decedent left surviving children who were not also the children of the surviving spouse. Although still relatively rare, even in second marriage situations, I increasingly see clients who have entered into pre-nuptial or post-nuptial agreements that attempt to limit the right of a spouse to claim a spousal share of the first spouse to die’s estate at death.

Economic downturn. The economic downturn of the last several years has also resulted in Boomers having to take stock of their plans for retirement and has made saving and estate planning even more important. Many Boomers will likely defer retirement, health permitting, until well beyond their traditional retirement age to make up for losses experienced in values of their homes, 401K plans, IRA’s and other investments. If there’s a silver lining to all of this it’s that Boomers, by and large, are also more invested in taking better care of themselves, so with any luck, even after deferring retirement they may still enjoy just as many years in retirement as their parents did.

Living long, however, does not always equate to living within ones means or living well. Though none of us wants to consider it for our parents or ourselves, the catastrophic cost of long term care is also something on the horizon of which we should all be mindful. The statistics about the exponential growth expected in the numbers of people suffering from Alzheimer’s Disease and the younger ages at which A.D. is being diagnosed are sobering. Failing to plan for the possibility of long term care is not an option for Boomers, especially since Federal and State governments are doing everything they can to shift more of the cost of long term care directly to the consumers of such care.

Long Term Care Insurance. Long term care insurance should be an integral part of any Boomer’s estate plan, particularly for those who are contemplating a second or later life marriage. While any long term care policy is probably better than no such policy, the terms of such policies, their coverages, limitations and exclusions can be devilishly complex. It behooves Boomers and all other consumers to consult a knowledgeable, independent LTC insurance agent or financial planner to help wade through the fine print and chose a policy that makes the most individual sense. Don’t assume that just because you’ve had that heart attack, been diagnosed with diabetes or had other health problems that you’d be precluded from obtaining LTC insurance. An independent, knowledgeable agent or financial planner who is not beholden to one insurance company, is in the best position to advise you on this subject. Your local chapter of the Alzhiemer’s Association may be able to provide you with a referral to such an independent agent or financial planner.

Health Care Advance Directives and Powers of Attorney. Just as important to Boomers as having a good will or trust in place to handle their property at death, and a good LTC insurance policy in place to help pay for long term care, is the need for health care advance directives and powers of attorney to prevent court (or state) intervention in their private affairs during any period of incapacity they experience before death. These documents take on particular importance in second or later life marriages, since spouses and children from previous marriages may have different ideas about how to best manage your finances or what kind of care you should receive during a period of incapacity. Absent such documents, we see more and more families having to resort to the court supervised process of having a guardian or conservator appointed for a loved one to help make these personal decisions, often at significant emotional and financial cost.  The recent Terry Schiavo case from Florida and the Hugh Finn case in Virginia illustrate further the importance of all adults having these documents in place to prevent or at least minimize the possibility of government intervention in end of life care decision making.

Return of the Estate Tax in 2011?  Unless Congress acts before then, the federal estate tax (which disappeared on January 1, 2010) will return for estates of decedent’s dying after December 31, 2010, that exceed $1 million in value.  Many commentators have suggested that Congress will act to resurrect the 2009 estate tax exemption of $3.5 million, but be on the lookout for any developments in this regard. Boomer or not, this is an issue to be reckoned with and addressed in your estate plan if your estate is likely to exceed $1 million.