Senior Resources and Elder Financial Planning

Edward C. LaBrecque, CPA, Ph.D has been a CPA for 46 years and has worked in public practice for 50 years. He is sole shareholder of LaBrecque & Company, CPAs, and serves as adjunct professor of accounting in the graduate school at Schiller International University. He is a member and immediate past chairman of the CPA Elder Planning and Support Services Committee of the FICPA. He is also co-author of a useful FICPA brochure on Elder Financial Planning.

 

Certified public accountants, through education, training and experience, have unique abilities to assist clients by providing services tailored to meet the needs the aging process creates.

 

End-of-life planning begins with an estate plan that meets a client's lifetime health and financial needs. Estate planning shouldn't be limited to the wealthy. Everyone needs a strategy for managing their personal affairs and, on death, the distribution of their assets.

 

It has been said that as we grow older and more experienced, we overrate our ability to judge others. This often leaves seniors open to those who would take advantage of them.

Questions and Information for Seniors

  • Estate Planning Outlines Asset Management and Distribution

    End-of-life planning begins with an estate plan that meets a client's lifetime health and financial needs. Estate planning shouldn't be limited to the wealthy. Everyone needs a strategy for managing their personal affairs and, on death, the distribution of their assets.

    An estate plan may include a living trust. Living trusts are established to manage assets while a client is alive. Usually, the client remains as the beneficiary of the trust until his or her demise. The living trust provides for a successor trustee in the event that a client becomes incapacitated or dies. Upon the client's death, the assets in the living trust are distributed to the remaining beneficiaries. A living trust avoids the probate process.

     

    Probate is a court process that can be expensive and unnecessarily time consuming. It begins when a will is filed after a death. The court is concerned only with asset distribution based on the terms of a will after all debts are paid.

     

    Wills can be the subject of much court litigation brought about by heirs who don't believe they received a fair slice of the deceased's estate. However, dying without a will creates an intestate estate, which puts the state in the position of deciding how to distribute the deceased's assets.

     

  • Plan Should Include Medical Directives

    Estate planning can be a contemplative and painful process. It forces us to face the ultimate uncontrollable event, death. A CPA advisor can facilitate a comprehensive planning process for clients and their families. Every estate plan must consider end-of-life and health-care issues. Medical advances have improved the quality and length of life, and have brought right-to-die issues into focus.

     

    During the planning process, clients should prepare a document that states what medical treatment they do or do not want if they are injured, or too ill direct their own care. The document may be called many different things — an advance directive; living will; health-care declaration; health-care power of attorney; patient-advocate power of attorney; or the five wishes living will.

     

     These documents can give a named person or physician the power to "pull the plug" on life when a cure is not possible and death is imminent. Without this document or the permission of family members, physicians may be obligated to begin resuscitation procedures. This may be painful and may only temporarily extend the patient's life without improving the quality of life.

     

    Many people wish to complete their lives in the privacy of their homes, or in a hospice-designated facility, rather than in a hospital. The purpose of hospice is to enhance life during the final stages. Hospice is care, not a cure. It is provided in a family-oriented, home-like atmosphere and offers emotional support for the terminally ill and their families. Patients must meet certain criteria to receive hospice care.

     

    The final step in the estate-planning process is for clients to outline their funeral and burial preferences. They should leave a letter of instruction addressed to a health­care surrogate and family members, and give their attorney a copy. Clients alsomay want to consider writing their own obituaries, to ensure their life history is correct.

     

  • Help Protect the Elderly from Victimization

    It has been said that as we grow older and more experienced, we overrate our ability to judge others. This often leaves seniors open to those who would take advantage of them.

       According to law enforcement officials, those who prey on the elderly primarily are family, friends, neighbors and caregivers, rather than strangers. Most victims are 75 or older, suffer from dementia or other health issues and have some savings they give to trusted people for safekeeping and bill paying.

     

    Other types of financial fraud involving the elderly include bogus phone-contest awards, phony charities and investment fraud. There are several signs of this type of exploitation of the elderly. The obvious include sudden changes in an elder person's financial condition, additional names on bank signature account cards, missing cash, unpaid bills and bill-collector activity.

     

    If you suspect that someone is taking financial or physical advantage of any elderly person, including a family member, neighbor, friend or client, call the National Center on Elder Abuse at (800) 677-1116. If the situation is serious, threatening or dangerous, call 911 or the local police for immediate help. Too often, elderly victims can't or won't report such activities because an abuser is intimidating or bullying them.

     

    For the elderly, the final years should be the good years, the golden years. CPAs play an important role in ensuring that seniors' expectations are met.

     

    We can help develop a plan to deal with end-of-life issues. We can work with other professionals — such as attorneys, health professionals, financial planners and guardians — to help the elderly and their family members or guardians. We

     

    can investigate financial abuse and provide many other services tailored to the needs of this growing segment of our population. And we can provide our clients with CPA elder-planning and support services.

     

    By providing these services, we can help the elderly live longer, more productive and financially secure lives.

  • Planning and Decision Making for the Elderly

     As the baby boomers reach retirement age, the number of  Americans 55 and older will almost double between now and 2030,  from 60 million to more than 107.6 million. The Administration of Aging, www.agingresearch.org, states that approximately 5,000 people turn 65 every day of every year.

     

         Here in Florida, we have more elderly residents than all other states. In the past, many fixed-income retirees from other states moved to Florida expecting to spend their remaining years in a lower cost-of-living environ­ment. As Census Bureau reports chronicle the continued growth of Florida's elderly population, economic stud­ies reveal Florida's cost of living also has increased.

     

         Today's elderly retirees are better educated. Many have more financial resources, and, if the statistics are correct, will work and live much longer.

     

         Many Florida CPAs recognize additional opportuni­ties because they practice in the "grayest" state in the United States (U.S. Census Bureau Demographic Profiles, Census 2000). This gives us the opportunity to extend our professional services to a growing popula­tion of elderly who no longer see 65 as the start of an "endless vacation," but as a "third age" — an age where careers are extended, new careers begin and personal productivity grows. Many of the new retirees recognize the need to seek financial advice about personal finan­cial affairs. This gives CPAs the opportunity to serve elderly retirees who no longer are able to maintain their personal financial affairs.

     

      Elder-care service focuses on finances. Can the elderly person live on his or her current income? Can the person meet future needs out of his or her current income, or will he or she have to consider withdrawing funds from a retirement nest egg? If so, how much should be with­drawn? Is he or she capable of paying bills on time, maintaining a bank account and making informed financial decisions?

     

      When working with seniors, it's out job as CPAs to identify the engagement issues and detect any constraints before gathering information and identifying our elderly clients' goals and objectives. In many engagements, the CPA's eldercare client might not be the elderly individual, but rather a family member or the guardian of the elderly person.

     

      After gathering relevant information and identifying goals and objectives, elder-care CPAs usually perform a "financial check-up" that includes: Identifying sources of income, the nature of expenses  insurance coverage in force, investments, retirements plans and specific tax issues. We then develop a financial and personal care plan, which many involve other professionals. Upon acceptance of the play by our client, we proceed to implement the plan. As with services that we provide for all other clients, elder-care CPAs must monitor and modify the implemented plan when unanticipated changes occur, such as illness.

     

      As elder-care CPAs, we often are called upon to provide retirement planning services for those anticipating the beginning of an "endless vacation," as well as those "third age" individuals who intend to extend their careers or begin new ones beyond 65. In either case, retirement planning is the same except that the "third age" client will continue to build his or her retirement nest egg by delaying that endless vacation.

      Retirement planning for the elderly is very similar to developing a financial plan for a much younger person. It involves organizing and analyzing data, checking sources of income and budgeting for everyday living expenses. A sig­nificant difference between a retirement plan for the elderly and a personal financial plan for a young person is that an elderly person's income is likely to be fixed rather than grow substantially over his or her remaining lifetime.

     

       Meanwhile, money set aside for living expenses will purchase less and less as the purchasing power of the dollar decreases through the intervening retirement years.

     

      Retirement also brings about lifestyle chances, such as downsizing to a smaller home, owning one automobile instead of two and maybe, eating at restaurants less frequently. Elderly citizens can't easily replace lost capital, which means that retirement planning must consider all available alternatives that could result in maximizing income and minimizing everyday expenses. Some of these alternatives may involve investment portfolio changes, refinancing a home mortgage, revising insurance, dipping into IRAs or switching to annuities, home equity conversions, life settlements, and, yes, a part-time job.

     

       The preparation of any retirement, financial and/or personal care plan for the elderly must consider the overwhelming possibility that a serious illness will strike the client sometime during the remaining years. Most eldercare clients will be covered by Medicare insurance, which now covers hospital, medical and drugs. Most eldercare clients should have a "medi-gap" or supplemental health insurance and long-term custodial care insurance.

     

        We, as CPAs, are in a unique position not only to provide pre-and post-retirement planning, but also to guide our clients in making healthcare decisions. We can educated them about effective financial management and assist them so they can avoid guardianship. We also can help our seniors provide for their families and to plan ahead so as to avoid income taxes, gift takes and inheritances taxes. We can and should protect them whenever possible from the unscrupulous few in our society who prey on our seniors.

     

        These are all very good reasons to learn more about eldercare services and to include them in your practice. However, one of the best reasons for Florida CPAs to learn more about eldercare is that we or a loved one may need this assistance. Like the rest of the population, Florida CPAs are growing older.

     

          As of August, 2006, more than 45 percent of FICPA members were age 50 or older. We are an integral part of the graying of America.

     

          CPAs need to learn more about elder care,  not only to serve an exploding senior market, but also to prepare themselves for that "endless vacation" or maybe, entry into a new, exciting "third age."

  • Why choose a Certified Public Accountant to help you with elder financial planning?

    Integrity, objectivity and independence are all good reasons to count on a CPA as your trusted advisor. CPAs have a thorough understanding of the financial needs and concerns of elder clients and their families.

     

    Dr. LaBrecque, who earned his CPA certification in 1965, also brings an experience and a perspective that makes him particularly qualified in the field of elder planning services, serving as Chairman of the Elder Planning and Support Services Committee of the Florida Institute of CPAs, where he co-authored the Institute’s new brochure on Elder Financial Services

     

    He is also author of Attrition, A Critical Factor in Meeting the Demand of CPA Services in the Twenty-First Century, which is a study of the affect of aging within his profession.  Ed is also the author of several articles in Florida CPA Today, including a recent article titled End of Life Issues: Planning for the Future, and another insightful work, Planning and Decision Making for the Elderly.

     

    Ed also has served on the Florida Institute of CPAs’ Accounting Principles and Auditing Standards Committee. In 2008, he was honored by being named as an Ambassador of the American Institute of CPAs.

     

    Edward C. LaBrecque is sole shareholder of LaBrecque & Company, CPAs (Edward C. LaBrecque CPA, PA). Dr. LaBrecque received his Bachelor of Science degree in accounting from Bryant University.  He received his MBA with honors in International Business in 2004 and his PhD in Management in 2008.

     

    Prior to establishing the firm in 1971, Dr. LaBrecque was with the international firms of KPMG, LLP in New York and Washington and Price Waterhouse Coopers in Boston, Portland, Maine and Tampa

     

  • Who needs CPA Elder Planning Services?

    Every individual born before 1960 should be utilizing the services of a competent Elder Planning CPA to assist them in planning their future. In addition, families with financial issues of aging and special needs can benefit from CPA services.

     

       We have experience in crisis management, investigating financial abuse and other key areas, giving us the right tools and perspective to tailor our services to meet your specific financial needs.

  • We all know “you can’t take it with you.”  So, what should be included in the suitcase you leave behind for your family?

    The suitcase that you leave behind should be crammed, not with money, but with documents and directives. You should include among the documents your insurance information, copies of your recent tax returns, as well as copies of your Social Security card, birth certificate, marriage license, adoptive records, military discharge papers and, if applicable, divorce papers.  You should also include a copy of your health insurance card, any durable powers of attorney, health directive, will or trust document, the names and addresses of your children and copies of recent bank statements, investment holdings and titles to real and personal assets. The original of each of these documents should be in a bank safe deposit box or your own personal, fireproof home safe.

     

     On the list of not to be forgotten items are two very important, but often neglected items.  The first is PIN numbers and passwords.  Be sure to include in your records a list of your PIN numbers and passwords for bank accounts, loans, credit cards, mortgages, etc., as well as noting which of these items is paid electronically as opposed to paid by mail.  Without PINs and passwords, your family will not be able to access your accounts in an emergency.  The second item is care of your pets.  Be sure to provide a directive to family as to your wishes regarding the care of your pet or pets along with the name of your pet'

     

    s vet, address and telephone number.  You should also include a listing of the medications that your pet must take and his or her favorite foods and eating times.

  • Should you roll over your traditional IRA into a Roth IRA?

    Within the next few years, the number of Americans reaching, or at retirement age will place a very heavy financial burden on our government. This burden can only be reduced by increasing the federal debt, and incurring the associated costs of carrying this debt, or raising taxes.  We are betting the government will raise taxes to pre-Reagan levels, if not higher, to meet these costs.

     

    If we are right, both Roth IRAs and Roth 401Ks make good investment sense today, because Roth retirement accounts are funded with today’s low rate, after-tax dollars rather than taxed at higher rates in the future when the distributions are needed to meet living expenses.

     

    All too often, the “long view” is excluded from financial planning only to be replaced with plans resulting in immediate financial results.

     

    This could be your year to convert an IRA to a Roth IRA under the new conversion rule. Here is the new rule for conversions to a Roth IRA in 2010.  First, prior to the new rule, IRA conversions to a Roth IRA were subject to an income limitation and an onerous tax payment.

     

    This year the limitation is eliminated.  Almost anyone will qualify for the conversion.  In addition, the “sting” caused by paying the tax on the amount of the IRA income not previously taxed has been reduced.  The tax on the amount converted from an IRA account in 2010 can be spread over 2011 and 2012 at today’s low income tax rates.  However, before you make the conversion, you should consult your CPA.

  • Should you have a will, a living will (trust) or something else?

    A will is a document that outlines how you want your property to be disposed at your death.  A will should be prepared by an attorney practicing in the state where you reside.  In many cases, wills are contested in court by relatives who feel they did not receive their fair share.  Seniors should make sure their will is valid, reviewed and modified periodically.  When you pass on, your will is filed in probate court.  It then becomes the responsibility of the court to assure that your assets are distributed according to your will, as well as to resolve any conflicts amongst your heirs and would-be heirs.

       A living will/trust is established to manage your assets during life. When you set up the trust with the assistance of an attorney, you will be appointed as the trustee, and most likely, the beneficiary during life.

     

      Thereafter, you continue to manage, control and receive the benefits of the trust during your life. Upon your death, the trust assets are distributed to your designated beneficiaries without delays caused by an associated with the probate process. Many seniors establish living wills or trusts, but fail to fund them by transferring their assets to the trust. Don’t make this mistake.

     

      There is also a pour-over will, which transfers to the trust any assets not originally included in the trust.  A pour-over will is subject to probate.

     

       In each of these matters, you should consult an experienced attorney, who will  work in tandem with your CPA on elder financial and tax planning matters.

  • Does everyone need life insurance?

     If  no one is dependent on your earning capacity, you do not need life insurance.

     

    If you have others who are depending on your earning capacity, however, you need sufficient life insurance to meet the short and long-term living expenses of those dependents.  In addition, you should have enough insurance to cover not only your burial expenses, but any substantial debts or taxes you may owe at the time of your death.

     

    Generally, when purchasing insurance, choose a level premium, term-insurance policy that provides protection at a fixed monthly cost until you reach the age of 80. Avoid policies that combine a death benefit with an investment feature. Insurance is not an investment vehicle. It is protection and liquidity for your dependents that “kicks in” when you “kick off.”

  • What's the difference between power of attorney, guardianship or conservator-ship?

    Generally, a power of attorney insures that financial and other important decisions will be made in accordance with your preference should you become incapacitated. Generally a durable rather than a non-durable power of attorney should be drawn up with the assistance of a competent attorney and in collaboration with your elder financial planning CPA.

     

    Frequently, CPAs come into situations in which a senior’s ability to make personal and financial judgments is impaired and the individual has not prepared a durable power of attorney or other device.

     

    When a person has not prepared a written directive, the courts may be forced to decide who will take care of matters for the senior. In such cases, the court may appoint a guardian to manage the individual's personal and medical affairs and a conservator to manage the financial affairs of the individual.

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