When it comes to retirement, surveys of our aging population leave us with one resounding piece of advice:  Don’t underestimate how long you could live.  If you’re lucky enough to retire at age sixty-five, then it might not be unreasonable to expect that you could need to subside on your retirement savings for another thirty years.  A 2015 survey of octogenarians (people in their 80’s) by New York Life found that more than half of participants were not expecting to live as long as they had, leaving them wishing they had saved more money throughout their lives.

Americans are now living much longer lives than our grandparents did.  Our own longevity is increasing, while the longevity of Social Security is in doubt.  The 2015 Social Security Trustee’s annual report projected that the combined trust funds that help pay old age and disability benefits will run out by the year 2034.  That means the funds will dry up by the time today’s 48-year-olds reach full retirement age.

This projection doesn’t mean that retirement payments will stop completely in 2034.  It means that by that time, the funds won’t hold enough money to pay the retirement benefits fully; only about 75% of the benefits will be covered.  So what does that really mean for us?  It means that unless politicians act to adjust the current system, we may not be able to rely on Social Security getting us through our retirement years.  We like to think that Congress will act sooner rather than later to initiate a solution.  But for now, the current precarious position of Social Security forces us to think beyond “Plan A” and onto “Plans B, C and D.”
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Shockingly enough, over half of all American households nearing retirement age have absolutely no retirement savings.  So what provides most of the retirement income for about half of all seniors?  You guessed it:  Social Security.  If aging Americans can’t fully rely on Social Security to provide for us through retirement, then we need to think about financial planning, and the sooner the better.

More and more Americans do not have access to a retirement savings plan at their workplace.  While it’s clear that most of us are far more likely to save for retirement if we can do so out of our paychecks, there are still plenty of ways to save even if our employer doesn’t provide a 401(k) plan.  If you're planning for retirement, consider speaking with a financial adviser about funding an IRA or a Roth IRA.  An IRA, or an Individual Retirement Account, is a type of savings account geared toward retirement that offers a few tax advantages.  With traditional IRAs, you can defer paying income tax on up to $5,500 that you contribute.  Investors over age 50 can defer paying income tax on as much as $6,500.  You can defer to pay income tax while you invest your money in your IRA, but income tax will be due once you withdraw the money from the account.  A Roth IRA is slightly different, in that you do not get a tax deduction on your contributions, but you don’t pay any tax on the earnings and the withdrawals are tax-free when you’re ready to retire.

Another way to ensure you’re saving for retirement is to put aside your tax refunds every year.  Save them in an account promised for retirement.  In fact, by using IRS Form 8888, you can directly deposit your tax refund into a savings account, an investment account or an IRA.

If you have trouble saving your earnings, try setting up a direct deposit.  You can allocate a certain percentage of each of your paychecks to go into your retirement account.  That way, you can save passively and ensure your money is set aside in a safe place.  If you’re wondering how much you should set aside, most financial experts are now recommending saving 15% of your income for retirement.

If you are very close to retirement age already, consider delaying your Social Security benefit.  The older you are when you file for Social Security benefits, the greater your annual payment (up to age 70).
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Once you have your nest egg, no matter how big or how small that egg may be, the most important and urgent next step is to protect it.  Building your savings and failing to protect them is like storing your nest egg on the edge of a brick wall; Humpty Dumpty can fall at any time.  In our elder law practice we've witnessed this happen to many families.  Illness and injury send over half of all older adults into long-term care facilities.  Often, a person admitted into a long-term care facility, such as a nursing home, feels forced to spend down their savings and even sell their house to pay the bills.  With nursing homes costing well over $80,000 per year, it’s no wonder that most families find their savings drained within the first year.  Don’t let this happen to you.  With a little planning, you can protect your savings from the devastating costs of long-term care.  In fact, even if you or your loved one is already admitted into a nursing home, there are still steps you can take to protect whatever savings you have left.  We can help you protect your assets from the costs of long-term care and health crises.  Contact us for a free consultation.

An LLC, or a Limited Liability Company, is fairly easy and affordable to form in the state of Virginia.  An LLC is a useful entity to form for many reasons.  If you’re starting a business, forming an LLC will offer you legal protection.  As a business owner, you would have limited liability for debts and obligations.  For example, if you own a dance studio and one of your students breaks a leg on a slippery floor, and they decide to sue for medical bill payments, that student would need to sue your business (your LLC) instead of suing you individually.  That way, your LLC would be financially responsible, instead of risking your own personal bank accounts.  Other advantages to forming an LLC include pass-through taxes, which means that you would not be required to file a separate corporate tax return, and enhanced credibility for your business.

The first step in forming an LLC is deciding on a name.  Your name must end with “Limited Liability Company,” or “LLC.”  For example, our fictional dance studio could be called “Dave’s Dance Studio, LLC.”  There are a few prohibited words, however.  You cannot choose a title that could be confused with a state agency, such as “Secret Service” or “IRS.”

Once you’ve decided on a name, you will need to do a name search to make sure it’s available.  The next step is registering your LLC with the State Corporation Commission.  You can do this online or by mail.  Upon registration, you will need to select a Registered Agent for your LLC.  The registered agent can be a person or a business who is responsible for dealing with all the paperwork, receiving the mail and filing annual state taxes for your LLC.  Your registered agent can be someone within the company, including yourself.  Some people choose to name their lawyer as their registered agent, because one of the most important responsibilities of the registered agent is to "accept service of process," or be the one to be served with a lawsuit if the business is sued.  You must file the Articles of Organization and pay a non-refundable fee of $100.

Once you’ve formed your LLC, don’t forget to create an operating agreement.  An operating agreement is not required of an LLC in Virginia, but it’s always a good idea to have clear-cut rules and guidelines for your business.  An operating agreement is a simple legal document that outlines the operating procedures of your company.  If you’re interested in forming an LLC, or if you have already formed an LLC and would like to establish an operating agreement, we can help you draft the professional legal document you need.  Contact us for a free consultation.

Granting someone you trust a power of attorney allows that person -- known as your "agent" or "attorney in fact" -- to manage your financial and personal affairs if you are unable to do so.  Your agent is empowered to sign your name and is obligated to be your fiduciary -- meaning they must act in your best financial interest at all times and in accordance with your wishes.

A power of attorney can be made “springing,” which means that it only goes into effect under circumstances that you specify, the most typical being when you become incapacitated.  Often that means your agent cannot act until he or she provides doctors' letters and sometimes court orders to prove you are incapable of making decisions for yourself.

An attorney can help you decide which form makes the best sense for your circumstance. In any case, take care in choosing your agent. That person should be competent, trustworthy, willing to take on the burden of your affairs and financially secure.

If you choose a relative or friend as your agent, you probably won't have to pay them.  But if you name a bank, lawyer or other outside party, you will have to negotiate compensation, which can range from hourly fees to a percentage of your assets paid annually.

Why do you need a power of attorney?

No one is immune from aging or the loss of mental clarity that may come with it. And you're never immune to health crises that may leave you unable to handle the business of your life: paying bills, managing investments or making key financial decisions.

If you become incapacitated without having a power of attorney, the court may appoint a “conservator” to manage your affairs and handle your assets.  This process might cost your family well over $2,000 in attorney’s fees and court costs, not including the cost of the lawyer who will be appointed by the court to represent you during the court proceeding (this lawyer is called the guardian ad litem). 

The person chosen by the court may not be someone you would have picked.  Assigning someone you choose and trust a power of attorney now could save you and your family from heartache later on.

We create estate plans to make sure our family is taken care of.  It’s important to remember that our family includes our pets.  Our furry, feathery and scaly friends depend on us, and our estate plan should provide for their future if we’re no longer available to care for them.

1.     Your pet could live for a long time, even without you.

The average life span of a dog is 13 years, the average life span of a cat is 15 years and certain parrots and turtles can live up to 100 years old!  If you become ill and can no longer take care of them, or if you pass away, your pet could still need care for many years to come.

2.     Promises from friends or family may not stand the test of time.

We can’t predict what will happen in our lives or in our relationships.  Maybe your brother made a promise to take care of Fido a few years back, but he’s since taken a new job and moved across the country.  Maybe he’s moved into a condo that has a strict no-pet policy.  It’s always better to make formal arrangements.

3.     It’s simple to include your pets in your estate plan.

With the help of your lawyer, it’s fairly simple to include pets in your Last Will and Testament or to set up a trust for your pets.  You’ll simply need to decide who to appoint as your Personal Representative to take care of your pets in the event of your death.  Be sure to choose two or three people in case your first choice is unavailable.
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Keep in mind that whoever you choose to take care of your pets does not need to take them in permanently.  They can agree instead to act as a temporary caregiver until they find your pet a good permanent home.

A Last Will & Testament is one of the most important and vital documents one can have.  But why is it so important?

To start with, a will lets you decide who will inherit from you.  If you die without a will, the state will decide who receives your property and life savings.  This happens by statute, without regard to your wishes or your family’s needs.  A will allows you to decide who gets special family heirlooms, such as rings, china, or guns.  Without a will, your family may feud over these items, or fight over who gets to be the administrator of the estate, the person who will make such decisions.  Relatives battling over your possessions can weaken what may have otherwise been a strong family.
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A will allows you to leave money to your church or a charity.  It allows you control over the distribution of your real estate and it allows you to leave a life estate to your spouse or child, or to place conditions upon the use of your land.  A will allows for a smooth transition of your family business to the persons of your choice, in whatever manner you decide. 

Wills are especially important for families with stepchildren, as the laws of the state often will not reflect the wishes of the parents in such situations. The laws of the state will also not provide for your partner if you are not married.

Your will can state who you wish to be the guardian or guardians of your minor children or grandchildren.  If you don’t decide, the courts will.  This is particularly important if you want a specific family member or friend to take care of your children or grandchildren, but that person is not your next of kin.  It’s best to designate that person specifically in a will. Otherwise, the state might give custody to a relative who you may not approve of.

You can use your will to specify your wishes regarding burial, cremation, or memorial services.  Your will can help avoid family squabbles or “guilt buying” at the funeral home.  (It’s important to note that your will is often not read until after the funeral, so it is a good idea to advise your loved ones that you have specified your wishes in your will).

What if you don’t own anything and you don’t have any savings?

Suppose you die in a car wreck caused by a drunk driver.  Even if you have no property or savings, your estate might have a wrongful death claim worth a great deal of money, which will be distributed by the laws of the state if you have no will.  In other words, if you die in an accident, your family could be entitled to money because of it, and having a will in place will decide who that money goes to.

We can't avoid death, but having a will can help ease the burden on our loved ones.  Leaving a will for our loved ones to follow could help ease their stress and worry through a difficult time.

If you suffer an accident or illness and are unable to communicate your wishes, an advance medical directive (also known as a medical power of attorney) is a document that allows you to choose an agent who you trust to make your important medical decisions on your behalf.  Often, this agent is your spouse, friend, child or other family member.  An advance medical directive is an essential document to have in place, and here are three big reasons why:

1.     Facility doctors may not discuss your health condition with family, without the proper documents in place.

Your physician at the hospital or nursing home may not be able to discuss your health with concerned family members due to rules of patient confidentiality.  If you want to ensure that your loved ones will be part of the conversation about your health condition, treatment, medication and even life-or-death decisions, certain documents may need to be in place.  An advance medical directive would include HIPAA (Health Insurance Portability and Accountability Act) authorization to ensure your family is not violating the HIPAA act in discussing your health with your doctor.

2.     An advance medical directive lets you make the big, difficult decisions about end-of-life choices in advance.

For example, would you want your doctors to continue life-sustaining treatments if you have suffered irreversible damage to your mental functioning?  An advance medical directive is a statement of your wishes for the kind of life-sustaining medical intervention you want- or don’t want- if you are no longer able to communicate your wishes.

Knowing your preferences in advance can be extremely important in helping your family through a time of crisis.  These decisions are deeply personal, and an advance medical directive allows you to communicate instructions about your health care based on your personal beliefs and values.

3.     Without an advance medical directive, a court may step in to appoint a guardian to make medical decisions on your behalf.

An advance medical directive ultimately allows you to choose someone who you trust to be in charge of your medical decisions, rather than a guardian appointed by a court.  It’s important to choose your agent carefully.  That person should be able to understand essential medical information regarding your treatment, handle the stress of making tough decisions, and keep your best interests and wishes in mind when making those decisions.  When you’ve chosen the right person, make sure to communicate your beliefs, values and priorities when faced with the possibility of end-of-life decisions.

When you have an advance medical directive in place, you can rest assured that your important health care decision are in the right hands if a crisis hits.  To learn more about how to set up an advance medical directive and other essential documents, please contact us for a free consultation.

What happens if I have an accident or become ill and I'm unable to communicate?  This is a difficult question that many of us fail to ask ourselves, but knowing the answer in advance could save your family from a lot of heartache later on.

1. A Power of Attorney lets you choose who makes your key financial decisions if you are unable to do so in the case of accident or illness.​
2. A Medical Power of Attorney lets you choose who makes important medical decisions on your behalf if you are unable to do so. 

No one is immune from aging, loss of mental clarity or health crises that can leave you unable to handle the business of your life: paying bills, managing investments or making key financial decisions.  If you become unable to manage your affairs and you don’t have a power of attorney, then the court may appoint someone to handle your money, property and investments. This could cost your family over $2,000 in attorney’s fees and court costs. Having a power of attorney in place means that YOU decide who manages your affairs, so the decision is not left up to the court.

A medical power of attorney allows you to choose who will make your medical decisions on your behalf. It helps you make the big decisions in advance about end-of-life choices, which is extremely important in helping families through times of crisis. If you don’t have this document, the court can appoint a guardian to make medical decisions on your behalf.

Having a power of attorney and medical power of attorney allows YOU to choose an agent you trust so the important decisions that affect you will be based on your own beliefs and values.  If you're interested in creating or updating these important documents, please contact us for a free consultation.

We don’t like to think about the fact that our parents may eventually need more care than we are able to provide.  But sometimes a nursing home is the best place for an aging parent when they come to need constant care and health professionals who can monitor their condition 24/7.  Nursing home care can be essential and greatly beneficial, but the reality is that it can also be a crippling drain on a family’s finances.

About 7 out of 10 people over age 65 will need long-term care.  The national average cost for a private room in a nursing home is $83,580 a year, according to the Department of Health and Human Services.  The average nursing home stay is 2 ½ years and about 30% of people entering a nursing home will stay there for 5 years or more.

How can a family pay over $80,000 a year for five years or more?  These prices make financing high college tuitions look like a piece of cake.  Often, an aging parent in a nursing home feels forced to spend all their life savings and sell their house to pay the bills.  That means that children lose both their inheritance and their family home.  Then, once the money runs out, the aging parent finally qualifies for Medicaid assistance.  Medicaid starts paying the bills, and the parent receives the exact same care as before.

It doesn’t have to be this way- especially with a little advance planning- and now is the time to start.

Let me give you an example of why planning in advance can be of such great benefit.  When an aging parent applies for Medicaid, if they have given a gift within the last five years they will be required to wait a penalty period before they can qualify for assistance.  The length of the penalty period depends on the amount of the gift, and the exact calculation varies from state to state and sometimes within a state.  For example, a gift of $30,000 in most areas of Virginia will make a penalty period of about 5 months.  During the penalty period the parent will not be qualified for Medicaid assistance and will be forced to pay for nursing home care out-of-pocket.

This penalty period is important to understand as soon as possible, because if a parent is able to transfer their property or savings out of their name five years in advance of their needing nursing home care, that means they can qualify for Medicaid more quickly and whatever they gifted will be safe from the clutches of the nursing home.

But be careful!  The rules of Medicaid qualification are very complex, unforgiving and often misunderstood, which is why every aging individual should consult with an elder law attorney about how they should approach giving gifts.  There are many ways to be disqualified for Medicaid, and only an experienced elder law attorney will be able to assess what’s best for your situation.

The good news is that the earlier you start planning, the more you will be able to save.  Contact us or stop by our office in downtown Covington, Virginia, to learn more about how we can help protect what’s yours from nursing home costs.  We offer a free consultation to those who wish to begin planning today.