How to Prepare Your Finances for the Move to Senior Living

So, you’ve made the decision to move to “easy street”, where you can enjoy maintenance-free living, chef-prepared meals, weekly housekeeping, salon and barber shop services, modern fitness centers and so much more. But, where do you start?

A good first step is to identify, gather and organize any documentation so you have it all in one place.

Think about what information or documentation you have, and collect the paperwork on any real estate, investments, or other assets, you think you’ll need and have it in one spot. Consider creating electronic files and storing them in a secure platform for easy access.

Note: Titling assets is no easy task, so you may consider consulting an advisor. For more information visit the AICPA website.

Here are a few components to include in stored files:

Titles to Property and Assets*

To ensure your wishes are respected, establishing and updating how your property is titled is crucial. It is also helpful to provide copies of this information for dependents or loved ones.

Retirement Accounts and Pensions*
There are many types of retirement accounts and pensions, and they can come from current and/or past employers, as well as accounts created by you or your loved one.

You’ll want to identify all accounts and put things in order in case of an illness, emergency, death or other significant event.  Be sure to include accounts and resources from which you are currently receiving benefits.  Having this information organized and readily available will help to simplify the process.

Insurance Documents*

Health

Having copies of your health insurance is important. You’ll want to have a copy of your summary of benefits and coverage, as well as proof of insurance (insurance card).

Life

Like your health insurance, it’s important to have copies of your life insurance. You’ll want to have a copy of your policy and current beneficiary information.

Be sure to review all beneficiary designations on policies to make sure they are up to date. You’ll also want to know whether you, or a loved one, is currently paying for any premiums or receiving any benefits.

Wills*

A will is commonly defined as, a document in which a person specifies the method to be applied in the management and distribution of his/her estate after his/her death.

Without a will, there are no legal instructions about how property and assets are distributed to loved ones. In the situation where a will is not in place, the state decides how your property and assets are distributed, which means it may not be distributed the way you intended.
If you have a will, you will also want to review any versions to make sure your beneficiaries and assets are up to date.

Living Trust*

A living trust is commonly defined as, a trust created during your lifetime.

With a living trust, you may transfer property to a separate entity created to “own” that property, such as a house, boat, jewelry or mutual funds. Property may be removed from the trust, beneficiaries can be changed, or the trust may not be used any longer at all.

Aspects of a Living Trust:

• Allows the successor trustee to step in automatically at incapacitation, as defined in the trust document.
• Assets do not pass through the will upon death.
• Typically avoids guardianship court hearing upon incapacitation, as defined in the trust document.
• Assets are not part of the probate estate.  

Veterans Benefits*

There are many benefits available to veterans and their spouses. Veterans and survivors who are eligible for a VA pension, and who require the aid and attendance of another person (or are housebound), may be eligible for additional monthly payments above the normal pension amount. A VA pension can help pay for the assistance one may need for everyday tasks such as medication management, eating, bathing and dressing.
Here is a list of a few general resources for veterans:

• VA Home page
• Education Benefits: 888-442-4551
• Home Loan Guarantees
• Income Verification and Means Testing: 800-929-8387
• Military records: 

Commonly Used Financial Terms*:

Corpus (Body) – The capital or principal amount of an estate or trust.

Distribution – The dissemination of property to those entitled to receive it, according to the terms of a will or trust agreement.

Estate – Signifies the total assets of a person at the time of their death.

Estate Plan – A plan for the administration and disposition of an individual’s property during their lifetime and at their death; established in a will and/or one or more trust agreements.

Fair Market Value – The price that a property is transferred between willing buyers and sellers who are both acting rationally and with complete knowledge of the situation.

Fiduciary – An individual or institution bearing a relationship of trust and responsibility for the benefit of another. Examples include an executor, administrator, trustee or guardian, who is legally bound to work in their client’s best interest.

401(k) Plan – This retirement plan is established by employers and enables eligible employees to designate a portion of their salary to defer to the 401(k) investment choices selected by their employer. Employers may contribute to their employee’s 401(k) by matching a portion of the investment.

Gross Estate – The total value of an individual’s property in an estate before liabilities are deducted.

Individual Retirement Account (IRA) (also see Roth IRA) – An IRA is a tax-deferred investment and savings account that acts as a personal retirement fund for people with earned income.

Joint Tenancy – Two or more people mutually holding legal title to property – in the event that one owner dies, the surviving owner receives the entire property.

Living Trust – A trust that becomes effective while the creator is still living.

Lump Sum Distribution – One lump payment of an individual’s retirement plan benefits; rather than equal payments over a specific period of time. 

Pension Plans (defined benefit plan) – This is a traditional retirement plan offered by some employers that pays a set amount each year during retirement. These are company pensions that guarantee a specific amount of benefits to employees.

Roth IRAs (also see Individual Retirement Account) – Retirement contributions are not deductible up front, but withdrawals can be made tax-free after age 59½, in contrast to the traditional IRA.

Trusts – Trusts are legal arrangements by which the legal ownership and the beneficial ownership of assets are separated. Trusts can be divided into two major categories—revocable or irrevocable. Irrevocable trusts cannot be changed (with very few exceptions) once they are put in place. Revocable trusts can be amended and/or changed.

**Information from this blog has been provided from Michigan Association of Certified Public Accountants.

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