Long Term Care Insurance as an Estate Planning Tool

Long term care insurance is one of the many estate planning tools that may be considered as you prepare for the future. Although it typically isn’t the best tool for most people, it is an option you can consider and discuss with your estate planning attorney. At the Law Offices of David Knecht, we customize your estate plan to your needs, and we are happy to discuss the pros and cons of many estate planning tools. This article will provide an overview of what long term care insurance is, how it is used, and cost factors with information summarized from an article published by smartassets.com.  

What is long-term care insurance?

  • Long-term care insurance helps cover the costs of long-term care services, such as an assisted living facility, adult daycare or a nursing home when you can no longer perform independently, the basic activities of daily living. 

Why would someone consider long-term care insurance?

  • Of that group, 20% will need it for more than 5 years. 
  • Often health insurance does not cover these costs and Medicaid and Medicare have limitations that can impact your savings and assets.

 What are the pro’s of long-term care insurance?

  • Asset preservation – An insurance policy may protect your savings, but keep in mind that the policy typically does not cover everything.
  • More care options – the goal here is to enable you to pay for the type of services that you need when that time comes. 
  • Family concerns – you may want to prepare to avoid putting a burden on your family to care for you in the future.

How much does long-term care insurance cost?

  • An example illustrates the high cost: 55 year old man in the U.S. can expect to pay a premium of $2,220 per year according to a 2022 price index survey conducted by the American Association for Long-Term Care Insurance.
  • In the example, the coverage would be $165,000 in benefits when the policyholder takes out the insurance and $400,500 at age 85.
  • Long-term care insurance costs vary widely depending on factors such as health condition and age. 

How should I plan for long-term care?

  • Planning for your long-term care needs in not simple. The best plan will consider your specific assets, health, circumstances and family needs. 

Contact an Experienced Estate Planning Firm

If you have questions about any estate planning issue, we are here to help. At the Law Office of David Knecht, we have extensive experience with estate planning and look forward to exploring all your options for estate planning with you to create the best plan for you and your loved ones.  Contact us at 707-451-4502. 



Celebrating National Estate Planning Awareness Week!

Did you know that the third week in October is National Estate Planning Awareness Week? This commemoration was set up back in 2008 to encourage all Americans to protect themselves or their families in the event of sickness, accidents and untimely death.  

This article will summarize the text of the bill creating National Estate Planning Awareness Week to explain why this special week was created and help you understand why Americans commemorate estate planning awareness annually. 

What were the reasons why National Estate Planning Awareness Week was created?

  • A poll referenced in the text of the bill related to this holiday revealed that a large number of Americans believe they lack the knowledge necessary to adequately plan for retirement and that they are unfamiliar with basic retirement tools, such as a 401(k) plan. 
  • What are the benefits of estate planning?
  • Careful estate planning can greatly assist Americans in preserving assets built over a lifetime for the benefit of family, heirs or charities. 

 What are some of the important considerations relating to estate planning?

  • Safekeeping important documents
  • Documentation of assets
  • Preparation of legal instruments
  • Insurance
  • Availability of trust arragements
  • Charitable giving
  • Care of the benefactor during life

 What are some of the decisions that can be involved in estate planning?

  • Decisions about the method of holding title to certain assets
  • Decisions about the designation of beneficiaries
  • Decisions about possible transfer of assets during the life of the benefactor

What were some of the concerns that prompted the bill creating this estate planning holiday?

  • Many Americans are unaware that lack of estate planning and “financial illiteracy may cause their assets to be disposed of to unintended parties
  • Lack of careful planning may lead family members or other beneficiaries to being subjected to complex legal and administrative processes requiring significant expenditure of time
  • Lack of planning can lead to confusion and even animosity among family members upon the death of a loved one
  • Failure to prepare may lead to favorite charities being overlooked and benefactor’s gift-giving goals frustrated. 
  • Many Americans may want to have a plan for organ donation and use of life support functions, which intentions may be unclear without proper estate planning

Where does implementation of an estate plan start?

  • The first steps are education and planning and then the proper drafting and execution of appropriate legal documents, which may include will, trusts and durable power of attorney for health care. 

CONSULT THE LAW OFFICE OF DAVID KNECHT

Estate planning does not have to be a chore you dread or procrastinate. At the Law Office of David Knecht, we have years of experience with estate planning and can help make the process easy for you. In honor of Estate Planning Awareness Week, take a step today for the good of yourself and your loved ones, and call us today at 707-451-4502. 

 

Inheritance, Estate Planning and Charitable Giving: 4 Strategies to Reduce Taxes Now

MarketWatch recently published a great opinion piece entitled “Inheritance, estate planning and charitable giving: 4 strategies to reduce taxes now.” This article summarizes the strategies share in the article, but the full text can be found at this link:  

 

  • Offsetting Capital Gains

 

  • Capital gains are profit you make from selling an asset that has appreciated since you first obtained it.
  • These gains are taxed.
  • If you hold the asset more than a year, they are taxed at a rate lower than ordinary income. 
  • Losses on your assets can help reduce tax liability. 
  • Take away:  Do not wait to look strategically at how to harvest tax losses to offset gains until the end of the year. Engage in proactive review of your stocks throughout the year to evaluate the best course of action and to see if there are ways to take advantage of market volatility during times of decline.

 

 

  • Evaluating Roth Conversions

 

  • A Roth IRA conversion changes when the taxes are due and Roth IRA conversions are becoming increasingly popular. 
  • With a tradition al 401(k) or traditional IRA, the taxes are paid on the back end when you withdraw the money. 
  • With a Roth IRA conversion, you owe taxes on the amount you convert up front, which is difficult, but then the converted amount is able to grow tax free and you do not pay taxes at the time of withdrawals. 
  • Example from the MarketWatch article:  A client had 1 million dollars in a traditional IRA. She converted it to a Roth IRA, which required her to pay $500,000 in taxes on the front end instead of paying taxes when she taxes a distribution or when her beneficiaries inherit the account. But now, the 1 million in the Roth can grow tax free, which is an asset she can lean on during retirement of pass on to heirs. (Noe, a Roth IRA must be open for five years and the individual must be at least 591/2 years old to take the money out tax free). 
  • Take away:  Evaluate what taxes you can afford to pay up front and determine whether a Roth Conversion makes sense for your goals for retirement or for your goals for your heirs. 

 

 

  • Maximizing Charitable Giving

 

  • There are many ways for clients to be charitable and use new tools for tax exemptions.
  • “DAF” – Donor Advised Funds are third-party funds that are created for the purposes of giving to charity.
  • “RMD”-Your required minimum distribution, “RMD”  is the minimum amount you must withdraw from your Traditional IRA each year. You can give this to charity and reap tax benefits. 
  • Take away:  Consider how charitable giving can accomplish your altruistic objectives while taking advantage of tax exemptions.  

 

 

  •  “Giving While Living” to Family and Friends

 

  • Giving while living is a popular estate planning tool.
  • You can give up to $16,000 to any other person, that money is not taxed, and the person who receives it gets the full amount of the gift
  • Take away:  Giving to family and friends while you are alive is a way to enjoy estate planning while you are around to see the joy that your gift brings to your loved one. 

Consult the Law Office of David Knecht

Connecting with professionals who understand tax saving tools, who can explain the options to you, and who can create the right plan for your needs and goals is essential for effective estate planning.  Property and debt division is one of the most important aspects of a divorce for most people. Please contact us at the  Law Office of David Knecht. We have extensive experience with estate planning and can create a customized and effective estate plan just for you. Call us at 707-451-4502.

Divorce Can Be an Act of Radical Self-Love

For many, divorce is a challenge. You may worry about your children and your future. An opinion piece published by the New York Times presents a different paradigm. From the perspective of the author, divorce for some can be a liberating, refreshing change that propels you to a better present and future. This article will summarize the opinion, Divorce can Be an Act of Radical Self-Love, which can be found here: https://www.nytimes.com/2021/09/30/opinion/divorce-children.html

  •  “Everything is my choice, and I am in charge.”

The experience of one newly single mother who works full time and attends graduate school at night was highlighted in the New York Times piece. She said she enjoyed choosing her apartment, decorating it and paying for it. Her quote was, “everything is my choice, and I am in charge.” The ability to make choices independently is an oft overlooked benefit of divorce. 

  •  Children may benefit from being released from a toxic environment. 

Many divorcing parents worry how their children may react, but the author of the NY Times opinion piece posits that children may benefit from being released from a toxic environment. She writes: “Children know on an intuitive level what their parents are thinking and feeling. Long frosty silences, screaming matches and unrelenting tension between parents can inflict damage on the well-being of their children.” 

For research that examines the way in which predivorce marital conflict influences the impact of divorce on children, see https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1741-3737.2001.00197.x

See also research on whether children benefit when high-conflict marriages are dissolved , which can be found here.  https://www.jstor.org/stable/353565

  •  Freedom from a relationship that “crushes the spirit.”

Personal development can flourish post-divorce with the newfound freedom from a relationship that “crushes the spirit.” 

Research cited in an article on connectedwomen.co supports the idea that you may be happier divorced than married.  https://www.connectedwomen.co/magazine/the-brighter-side-of-single-mom-life-why-more-women-are-living-happily-ever-after-divorce/

  • A survey conducted in the US by research firm Avvo found 75% of divorced women reported they had no regrets ending their marriage compared to 61% of divorced men
  • A UK study by Kingston University surveyed 10,000 divorced men and women between ages 16 and 60; participants were asked to rate their happiness before and after their divorce, and again the women were found to be much happier for up to five years following the end of their marriages
  • The UK study also found that divorced women reported feeling more content than they had in their entire lifetimes; the findings also indicated women were more likely to seek the support of friends, improve their health and lifestyle, seek out new experiences, and discover more about themselves.

Consult with Experienced Divorce Attorneys at the Law Office of David Knecht

If you are considering whether divorce might be the right decision for you, get experienced legal advice. At the Law Office of David Knecht we have extensive experience with family law in California and can help you successfully navigate a California divorce.  Contact us at 707-451-4502 for more information.  

 

5 Tips for Winning a Divorce Mediation in California

The American Bar Association published an article with tips for a successful mediation, with content inspired by the best-selling book, “Getting to Yes.”  This article will summarize these mediation best practices, and the full story can be found here: 

  • Separate the person from the problem.

Both parties almost always have anger, resentment, and distrust of their ex, but for the purpose of negotiation those negative emotions – while often very justified—are not productive to getting what you want out of the negotiation.  Your ex’s personality is not going to change in the divorce.  However, if you can identify specific problems to be solved, then those may be negotiable.  

  • Develop options for mutual gain. 

The more options that are presented, the more likely it is that both parties can find an option that is palatable to everyone.  Look for options that are win-win for both people so that instead of a combat position, you are taking a problem-solving tact.  

  • Focus on interests, not positions. 

With a position approach, you have a winner and a loser.  With an interest-centered approach, you try to understand the interests of the other party and the goal is to achieve solutions not winners and losers.  When you take time to really listen to what makes the other side tick, then you will understand how to properly incentivize the behavior you want to achieve. 

  • Find objective material to lead to common understanding

Both parties can respond to objective material.  For example, if two parties value property or assets differently and neither will budge, then an assessor could be hired to provide data or internet research could be done to get objective information.  

  •   Focus on the best alternative to a focused agreement “BATNA.”

If you are trying to get everything you want in a negotiation, you are likely to fail.  If you identify what you really need and prioritize, then you are more likely to achieve those realistic goals through settlement. 

Consult with the Law Office of David Knecht

At the Law Office of David Knecht we have extensive experience with family law in California and can help you successfully negotiate a California divorce.  Contact us at 707-451-4502 for more information.  

 

5 Divorce “Don’ts” for a California Divorce

If you are considering divorce, you may have reached out to friends or family to get their advice.  Many people may have shared with you the do’s and don’ts to help you navigate the divorce process effectively.  This article will add to the advice, with a cautionary list of things not to do. 

 

  • Don’t necessarily keep the house.

 

A home can have a lot of sentimental value, but when evaluating it in the divorce, you need to look at it as simply an asset or a liability.  Determine whether you have sufficient resources not just for the mortgage and utilities but for any maintenance. Consider whether it meets your needs now. Evaluate with logic not emotion.

 

  • Don’t ignore potential tax consequences or retirement accounts. 

 

Make sure you understand how your taxes will be impacted going forward and how any deductions or stimulus for the children will factor in.  Talk to an accountant or lawyer to plan taxes ahead of time so that you aren’t caught by surprise. Additionally, make a plan for splitting the retirement so that you aren’t left without those resources later on.

 

  • Don’t forget about health insurance. 

 

If you or your children have been covered by your ex’s policy, you need to determine how health insurance will work going forward. 

 

  • Don’t spend lavishly out of spite. 

 

You may be receiving support pending the divorce, but generally you should spend money the same way that you did during the marriage.  Spending lavishly out of spite could interfere with the asset division.

  •  Don’t roll over all of an ex’s retirement account into an IRA if you need some of the money for divorce expenses.

 

If your divorce settlement allocates assets under a qualified domestic relations order (QDRO), then any withdrawal a QDRO alternate payee takes from a 401(k) or 403(b) is exempt from the 10% early withdrawal penalty—even if you’re under age 59½. The bottom line is if you think you’ll need money now, you might want to make a withdrawl before the rollover. But, do this with caution, because you will owe income tax on the amounts withdrawn.

Consult with Experienced Divorce Attorneys at the Law Office of David Knecht

At the Law Office of David Knecht we have extensive experience with family law in California and can help you successfully negotiate a California divorce.  Contact us at 707-451-4502 for more information.  

 

What is a Holographic Will and are Holographic Wills Legal in California?

This article will explain some basic principles relating to holographic wills in California.  What is a holographic will?

The definition of a holographic will found at is a holographic will is a will that is handwritten, dated and signed by the person writing the will.  See https://www.courts.ca.gov/documents/Common_Words_Probate_Cases.pdf

Where can I find the law relating to holographic wills in California?

 

CA Prob Code § 6111 (2017) contains the black letter law relating to holographic wills.  It can be found here:  https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?sectionNum=6111.&lawCode=PROB#:~:text=%29%206111.%20%28a%29%20A%20will%20that%20does%20not,as%20to%20the%20date%20of%20its%20execution%20and%3A

What does Section 6111 say?

(a) A will that does not comply with Section 6110 is valid as a holographic will, whether or not witnessed, if the signature and the material provisions are in the handwriting of the testator.

(b) If a holographic will does not contain a statement as to the date of its execution and:

(1) If the omission results in doubt as to whether its provisions or the inconsistent provisions of another will are controlling, the holographic will is invalid to the extent of the inconsistency unless the time of its execution is established to be after the date of execution of the other will.

(2) If it is established that the testator lacked testamentary capacity at any time during which the will might have been executed, the will is invalid unless it is established that it was executed at a time when the testator had testamentary capacity.

(c) Any statement of testamentary intent contained in a holographic will may be set forth either in the testator’s own handwriting or as part of a commercially printed form will.

What kind of attorney can help me with a loved one’s holographic will?

 

An attorney who has experience in estate planning law can help you with the probate process and understanding whether a holographic will is enforceable.

At the Law Office of David Knecht, at 707-451-4502, we have extensive experience with estate planning in California and can answer your questions relating to a holographic will.

 

Can I Get More Money if My Spouse Cheated?

A commonly asked question in divorce is whether cheating can be used as leverage for the other spouse to get more money or custody in a divorce.  Cheating is typically defined as a physical relationship with a person who is not in the marriage.  This article will discuss the legal consequences of cheating and explain why it is almost always irrelevant to financial or custody issues in a divorce.  

  1. Cheating is not one of the grounds for divorce in California. 
  • There are two grounds for divorce in California:  irreconcilable differences and permanent legal incapacity.  You don’t need to prove cheating to get a California divorce because irreconcilable differences covers all problems or differences that make one person in the divorce want to leave the marriage.

 

  • Typically cheating will not result in greater alimony for the other spouse. 

 

California does not consider marital fault when determining alimony payments, so cheating typically does not factor into alimony.

 

  • What are the factors a judge would consider in awarding alimony?

 

California has a list of the factors that a judge should consider when making a spousal support/alimony determination.  This statute can be accessed in its entirety here: https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?sectionNum=4320.&lawCode=FAM

(a) The extent to which the earning capacity of each party is sufficient to maintain the standard of living established during the marriage, taking into account all of the following:

(1) The marketable skills of the supported party; the job market for those skills; the time and expenses required for the supported party to acquire the appropriate education or training to develop those skills; and the possible need for retraining or education to acquire other, more marketable skills or employment.

(2) The extent to which the supported party’s present or future earning capacity is impaired by periods of unemployment that were incurred during the marriage to permit the supported party to devote time to domestic duties.

(b) The extent to which the supported party contributed to the attainment of an education, training, a career position, or a license by the supporting party.

(c) The ability of the supporting party to pay spousal support, taking into account the supporting party’s earning capacity, earned and unearned income, assets, and standard of living.

(d) The needs of each party based on the standard of living established during the marriage.

(e) The obligations and assets, including the separate property, of each party.

(f) The duration of the marriage.

(g) The ability of the supported party to engage in gainful employment without unduly interfering with the interests of dependent children in the custody of the party.

(h) The age and health of the parties.

(i) All documented evidence of any history of domestic violence, 

(j) The immediate and specific tax consequences to each party.

(k) The balance of the hardships to each party.

(l) The goal that the supported party shall be self-supporting within a reasonable period of time. Except in the case of a marriage of long duration as described in Section 4336, a “reasonable period of time” for purposes of this section generally shall be one-half the length of the marriage. However, nothing in this section is intended to limit the court’s discretion to order support for a greater or lesser length of time, based on any of the other factors listed in this section, Section 4336, and the circumstances of the parties.

(m) The criminal conviction of an abusive spouse shall be considered in making a reduction or elimination of a spousal support award in accordance with Section 4324.5 or 4325.

(n) Any other factors the court determines are just and equitable.

CONTACT AN EXPERIENCED DIVORCE ATTORNEY

An experienced attorney can help make the divorce process easier for you and help you make important decisions.  At the Law Office of David Knecht, at 707-451-4502, we have extensive experience in divorce in California.  Call us today!

 

The Secure Act and Estate Planning in California

The SECURE ACT (Setting Every Community Up for Retirement Enhancement ACT) is legislation designed to adapt to the changing needs of the US retirement system.  People are generally living longer, more people are working contract or freelance jobs, and the nature of work is changing.  This article will highlight some of the key points of this ACT, some of which may impact your California estate planning objectives.  For information from a financial planning point of view, see this article from Forbes:  https://www.forbes.com/sites/davidkudla/2020/01/10/four-major-highlights-of-the-secure-act/?sh=32dd845476b1

  1. Inherited Retirement Account.  

Previously, the rules allowed a nonspouse-IRA beneficiary to “stretch” required minimum distributions from an inherited account over their own lifetime.  The advantage of this old rule was that the funds could  grow for years tax-free.  The SECURE Act changes this old rule and now upon the death of the account owner, distributions to non-spouse individual beneficiaries must be made within 10 years.  

  1. No Age Restriction for Contributions to Traditional IRA’s.  

Previously, individuals had to be under the age of 70 ½ to contribute to a traditional IRA.  Now, there are no age restrictions.  This greatly expands the number of people who may be eligible to contribute.  However, on caveat is that the individual still has to have eligible compensation which includes wages, salaries, tips, professional fees, bonuses and other income generating streams received from working.  Commission, self-employment income, nontaxable combat pay, and military differential pay are also eligible compensation.  Certain stipend, fellowship and similar payments to graduate students and difficulty-of-care payments to caregivers can also be considered income for the IRA contribution purposes.   

 

  • Required Minimum Distributions Start at Age 72, not 70 ½.  

 

Prior to the SECURE Act, an individual was required to withdraw money from traditional IRA’s and employer tax deferred accounts such as 401 (k)’s at age 70 ½.  The new rule allows individuals to wait until age 72 to withdraw money, thus allowing the funds a little longer to grow.

Consult with the Law Office of David Knecht

If you are interested in learning more about how the SECURE Act changes can impact your estate plan, contact the Law Office of David Knecht, at 707-451-4502. We are an

Can I Force My Ex to Sell the House in California?

The question of whether you can force your spouse to sell the home in a divorce seems like a simple one, but the answer can sometimes involve complex analysis.  It is an issue that often arises because the home is one of the largest investments many married couples make. 

This article will provide some helpful background information to assist you in understanding potential issues, but we recommend seeking legal guidance on your specific situation, given the complexity of the issues and the significant value the home for many families.   

  1. California Family Code §2550.  California Family Code §2550 governs the division of property in a California Divorce.  The full text can be found here:  https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=FAM&sectionNum=2550.
  2. How does this law apply in practice?  This law provides that family court judges must divide the community estate equally, but this doesn’t speak to one specific asset, such as the house.  It refers to the whole of the community property estate, which will include other assets, such as money in the bank, vehicles, etc., and also debts, such as credit card debt, student loans, etc. 
  3.  What is the bottom line?  When Section 2550 applies the home, the bottom line is that one party may be awarded the home, but only when there is equality in the totality of the division of assets such that the other party’s right to reimbursement or an equalization payment is honored.  It is also true that a judge can order the sale of the home as per the authority provided by this law.   
    • What is partition and how is it used in a divorce to force the sale of the home
  4. Where is the law governing partition?  You can find California Code, Code of Civil Procedure §872.210 here: https://codes.findlaw.com/ca/code-of-civil-procedure/ccp-sect-872-210.html
  5.  Can Partition be Used in Divorce?  No, unless there are special circumstances involved, a partition action is specifically excluded for divorce proceedings:  “an action between spouses or putative spouses for partition of their community or quasi-community property or their quasi-marital interest in property may not be commenced or maintained under this title.”

Consult with the Law Office of David Knecht

If you have questions about how your home will be divided in a divorce or any other family law question,  please contact the attorneys at the Law Office of David Knecht, at 707-451-4502.  We have extensive experience in family law and can be a knowledgeable advocate for you.