The Wiewel Law Firm

Many Different Ways to Age: What’s in Your Future?

“No longer staid and boring, retirement homes offer dynamic options for seniors. Retirement communities are continually improving, by keeping seniors active with mental and physical exercises, while intertwining independent living and hands-on care.”

At some point in life, many people face the decision of moving into a retirement home or welcoming in-home care. Living in these communities can be a step up to aging in a place, where there is actually more independence. This is because you are not busy caring for a house or being confined to a solitary life in a private home. In fact, according to the article “The Many Faces of Aging” from Harrisburg Magazine, it can be a very dynamic option.

Deciding to buy or rent a home in an age-restricted community is a major step toward achieving a new lifestyle. It’s important to consider a number of factors, so you can make the right choice. Here are some questions and answers to consider.

What’s your budget? Make sure that you have the numbers right. Consider additional expenses, like yearly or monthly resident fees. Some luxury communities have equity memberships, which require extra financial investment. Don’t forget taxes.

What are the rules and covenants? Every community will have some kind of homeowner’s association that governs what residents can and cannot do. If you want to have grandchildren stay with you for an extended period of time, make sure that this is permitted in the communities you are considering. The homeowner’s association will implement and enforce restrictions, so know what they are beforehand.

What are the neighbors like? Your future social life is key to your enjoyment of the new community. If you are seeking like-minded people, be sure you’ll know what kind of people live there. Get a sense of the general vibe and personalities. Will you feel included and accepted?

What will a different climate feel like year-round? If you are thinking about moving far from your current home, be sure the new climate suits you. Rent before you buy, if at all possible. A southern home is great during the winter, but if you’re too uncomfortable with summer heat, or living most of your summer in air-conditioned spaces, it may not be for you.

Are there activities you’d enjoy? Make sure the activities you like are offered. If you are a reader, you’ll prefer a community with an active lending library and book groups. A golfer will, of course, want a high-quality golf course (although there will likely be additional fees).

Is good medical care nearby? Every community is different. In large communities, there may be on-site health care services. Some may rely on local ambulance companies and hospitals for all medical care. Medical services that are five minutes away may be a better choice, than those that require a one-hour transport to a hospital.

One of the biggest questions is, can you imagine yourself being happy in the community? If it represents a chance to thrive and grow safely as you age, then it just may be the right place for you.

Reference: Harrisburg Magazine (Nov. 8, 2019) “The Many Faces of Aging”

Bill and Hillary Have a QPRT—Is It Right for You?

Qualified personal residence trust has enabled Bill and Hillary to save on estate taxes but it doesn't make sense for everyone. An oldie-but-goodie tax strategy is back in the limelight thanks to the Clintons' much-publicized attempts to soften the blow of estate and gift taxes. The qualified personal residence trust is back. Bill and Hillary Clinton are making headlines for their use of the qualified personal residence trust or QPRT to save on estate and gift taxes. The Clintons drafted two (Qualified Personal Residence Trusts) QPRTs in 2010, divided the ownership of their Chappaqua, N.Y. home into separate 50% shares, and then moved those shares into the trusts, according to Bloomberg News. They bought the home 15 years ago for $1.7 million. Bloomberg says its estimated value for property taxes is $1.8 million. This tax strategy allows the Clintons to take the value of the home out of their taxable estate and pass it to beneficiaries without any estate tax at the end of the trust's term, so long as the grantors, President and Secretary Clinton, are alive at that time. As an Investment News article, titled "Clintons shine spotlight on tax strategy that splits a house in two," explains that this is not a tool for everybody. A QPRT really is logical for only extremely wealthy people who typically own multiple residences and face high estate taxes. The article advises that to get "the biggest bang for your buck," the residence should be appreciating in value, so that when it is passed to the beneficiary and out of the estate, it will be worth significantly more. The current estate tax and gift tax exemptions are $5.34 million for individuals, and $10.68 million for married couples filing jointly. An ideal candidate for a QPRT is an individual or a couple whose wealth is above those limits. Why? Because if you are over the exemption amount, you will be subject to estate taxes. If you are not above the limit, it is not a worthwhile plan. With a QPRT, a couple like the Clintons are able to split the ownership of the house and each create a QPRT with an interest in the home. There are criteria the home must satisfy in order to be eligible for the trust. For example, this works best with a secondary residence (a vacation home) instead of a primary residence. Here is the rub - at the end of the QPRT term, the home passes to the beneficiary. The beneficiary will have to start charging the grantor rent should the grantor reside there, and some parents do not like the idea of paying fair market rent to their children to live the home that has been their primary residence. Nonetheless, rent can work out as a way for grantors to transfer wealth to their kids outside of the estate, as the children must declare that rent as income. The original article also warns that there could be an economic downturn. This, in turn, might leave the grantors with little in the way of assets and no access to home equity. The house also should not have a mortgage, which can add income tax problems to the calculus. This is not a Saturday morning job on the honey-do list: drafting a QPRT is a job that will require experienced professional tax and estate planners. Talk with your estate planning attorney if you think that you are candidate for a QPRT, or even if you are not, to see if your current strategy is the best for you. Reference: Investment News (June 27, 2014) "Clintons shine spotlight on tax strategy that splits a house in two"

What Will You Do with Your House?

Real estate is often a family’s most valuable asset. It can be passed down from generation to generation and frequently carries a sentimental value beyond money. Handing down a major asset, however, is far from straightforward.

“The right time to create an estate plan has little to do with age and everything to do with the stage of your life,” according to a recent Forbes article titled "Passing Down Your Home? 3 Steps To Creating A Successful Estate Plan."Whatever the reason for developing an estate plan [and just because it is a good idea works!], once you are ready to start planning the Forbes article advises these steps:

Step 1: Communication.When parents and grandparents leave important details to chance, the results can be catastrophic. Estate planning can be an emotional process—especially when children or grandchildren grew up in the home. Speaking with all of them and maintaining close contact with financial advisors can help families remain in control and diffuse any potential tension. An estate planning attorney can also help families manage the many moving parts of real estate inheritance. As the article advises, find "an experienced, high-end estate attorney to do this for you."

Step 2: Your Tax Situation.When passing down your home tax issues can be a real hassle, especially for high net worth individuals (estates valued at $3 to $11 million). There are different planning and tax strategies for these individuals, to include setting up trusts called Qualified Personal Residence Trusts (QPRTs) to discount the value of their estates. QPRTs follow IRS rate schedules that allow families to discount the value of their properties based on the amount of time they have lived in them. QPRTs also allow families to transfer homes to inheritors as a gift, which results in a lower tax rate. Estate planning attorneys will determine the discount that can be applied to value of your home. The longer you commit to living in a house, the bigger the discount can be.

Step 3: Plan a Maintenance Fund.The Forbes article warns that passing a home down to your children is about more than just transferring the property itself—there is maintenance and up-keep. Parents need to develop a plan to help their children and future generations finance repairs and other unforeseen maintenance expenses.

Passing down your home is a delicate process that impacts your entire family. Your family home is one of your most valuable assets and a source of treasured family memories. With diligent planning and partnerships with a qualified estate planning attorney, you can help make sure that your home remains well-maintained and in your family for years to come.

Reference: Forbes (June 30, 2014) "Passing Down Your Home? 3 Steps To Creating A Successful Estate Plan"

Home Sweet Home – Downsize Or Keep In Retirement?

For most people, their house is their biggest asset. It's also their biggest expense. But when it comes to retirement planning, a house often falls to the bottom of the list involving changes in later life.

For some questions, there will always be at least two sides to consider. When it comes to retirement and that fateful step into the golden days of life, there are many questions to ask, plans to make, and decisions to make. As you do your research, it seems at every turn you receive conflicting advice. For example, do you continue to stay in your present home or do you move and downsize?

Even if you have yet to confront this fundamental retirement question, you ought to consult a recent article in The Wall Street Journal titled “When Should Retirees Downsize Homes?” The Journal asks, “when” not “if,” but that does not mean there is not another side of the story. Enter the DailyFinance with an article providing yet additional reasons to stay put. In fact, that article is aptly titled “7 Reasons Not to Move in Retirement.”

While you will want to read both articles, here are the seven reasons to stay:

• Save Money
• Services You Like
• A Social Network
• Proximity to Family
• Memories
• An Advance Plan for Your Later Years
• You Like It

What place does your home occupy in your life and in the lives of your loved ones? To some families a house is an asset, to others it is a home, and to others it is an anchor (whether wanted or not).

Whether you are planning for retirement or already in retirement, there is much at stake and the home can be a divisive issue.

So, again, what is the house to you and yours? How are you planning for it?

Reference: The Wall Street Journal (January 25, 2014) “When Should Retirees Downsize Homes?”

                  DailyFinance (January 22, 2014) “7 Reasons Not to Move in Retirement”