Category Archives: Estate Planning

The Coronavirus Pandemic Presents Ample Reasons to Reevaluate Your Estate Plan

April 17, 2020

The coronavirus health emergency is a reminder that life is unpredictable, and it makes sense to be prepared. It may sound self-serving, but the threats to life and finances posed posed by the pandemic offer ample reason to reevaluate your estate plan — or create one if you haven’t already.

Experts recommend that you will need to revisit your plan after certain key life events, including changes in health, finances, or family status. Unfortunately, this global health crisis can affect all of those aspects of your life. You should make sure you have these essential documents in place to protect yourself and your family:

  • Medical Directives. A medical directive may encompass a number of different documents, including a health care proxy, a durable power of attorney for health care, a living will, and medical instructions. The exact document or documents will depend on your state’s laws and the choices you make. Both a health care proxy and a durable power of attorney for health care designate someone you choose to make health care decisions for you if you are unable to do so yourself. A living will instructs your health care provider to withdraw life support if you are terminally ill or in a vegetative state. A broader medical directive may include the terms of a living will, but will also provide instructions if you are in a less serious state of health, but are still unable to direct your health care yourself.
  • Power of Attorney. A power of attorney allows a person you appoint — your “attorney-in-fact” — to act in your place for financial purposes when and if you ever become incapacitated. In that case, the person you choose will be able to step in and take care of your financial affairs. Without a durable power of attorney, no one can represent you unless a court appoints a conservator or guardian. That court process takes time, costs money, and the judge may not choose the person you would prefer. In addition, under a guardianship or conservatorship, your representative may have to seek court permission to take planning steps that she could implement immediately under a simple durable power of attorney.
  • Will. A will is a legally-binding statement directing who will receive your property at your death. If you do not have a will, the state will determine how your property is distributed. A will also appoints a legal representative (called an executor or a personal representative) to carry out your wishes. A will is especially important if you have minor children because it allows you to name a guardian for the children. However, a will covers only probate property. Many types of property or forms of ownership pass outside of probate. Jointly-owned property, property in trust, life insurance proceeds and property with a named beneficiary, such as IRAs or 401(k) plans, all pass outside of probate and aren’t covered under a will.
  • Trust. A trust is a legal arrangement through which one person (or an institution, such as a bank or law firm), called a “trustee,” holds legal title to property for another person, called a “beneficiary.” Trusts have one set of beneficiaries during those beneficiaries’ lives and another set — often their children — who begin to benefit only after the first group has died. There are several different reasons for setting up a trust. The most common reason is to avoid probate. If you establish a revocable living trust that terminates when you die, any property in the trust passes immediately to the beneficiaries. This can save time and money for the beneficiaries. Provided they are well-drafted, another advantage of trusts is their continuing effectiveness even if the donor dies or becomes incapacitated.
  • Beneficiary Designations. Although not necessarily a part of your estate plan, at the same time you create an estate plan, you should make sure your retirement plan beneficiary designations are up to date. If you don’t name a beneficiary, the distribution of benefits may be controlled by state or federal law or according to your particular retirement plan. Some plans automatically distribute money to a spouse or children. Although others may leave it to the retirement plan holder’s estate, this could have negative tax consequences. The only way to control where the money goes is to name a beneficiary.

Contact your attorney to make sure your estate plan is complete. Many attorneys are set up to meet with clients remotely, and states are beginning to temporarily relax their rules regarding requirements that documents be notarized in person.

Medicaid Protections for the Healthy Spouse

February 28, 2020

Medicaid law provides special protections for the spouses of Medicaid applicants to make sure he spouses have the minimum support needed to continue to live in the community while their husband or wife is receiving long-term care benefits, usually in a nursing home.

The so-called “spousal protections” work this way: if the Medicaid applicant is married, the countable assets of both the community spouse and the institutionalized spouse are totaled as of the date of “institutionalization,” the day on which the ill spouse enters either a hospital or a long-term care facility in which he or she then stays for at least 30 days. (This is sometimes called the “snapshot” date because Medicaid is taking a picture of the couple’s assets as of this date.)

In order to be eligible for Medicaid benefits a nursing home resident may have no more than $2,000 in assets (an amount may be somewhat higher in some states). In general, the community spouse may keep one-half of the couple’s total “countable” assets up to a maximum of $128,640 (in 2020). Called the “community spouse resource allowance,” this is the most that a state may allow a community spouse to retain without a hearing or a court order. The least that a state may allow a community spouse to retain is $25,728 (in 2020).

Example: If a couple has $100,000 in countable assets on the date the applicant enters a nursing home, he or she will be eligible for Medicaid once the couple’s assets have been reduced to a combined figure of $52,000 — $2,000 for the applicant and $50,000 for the community spouse.

Some states, however, are more generous toward the community spouse. In these states, the community spouse may keep up to $128,640 (in 2020), regardless of whether or not this represents half the couple’s assets. For example, if the couple had $100,000 in countable assets on the “snapshot” date, the community spouse could keep the entire amount, instead of being limited to half.

The income of the community spouse is not counted in determining the Medicaid applicant’s eligibility. Only income in the applicant’s name is counted. Thus, even if the community spouse is still working and earning, say, $5,000 a month, she will not have to contribute to the cost of caring for her spouse in a nursing home if he is covered by Medicaid. In some states, however, if the community spouse’s income exceeds certain levels, he or she does have to make a monetary contribution towards the cost of the institutionalized spouse’s care. The community spouse’s income is not considered in determining eligibility, but there is a subsequent contribution requirement.

But what if most of the couple’s income is in the name of the institutionalized spouse and the community spouse’s income is not enough to live on? In such cases, the community spouse is entitled to some or all of the monthly income of the institutionalized spouse. How much the community spouse is entitled to depends on what the Medicaid agency determines to be a minimum income level for the community spouse. This figure, known as the minimum monthly maintenance needs allowance or MMMNA, is calculated for each community spouse according to a complicated formula based on his or her housing costs. The MMMNA may range from a low of $2,113.75 to a high of $3,216 a month (in 2020). If the community spouse’s own income falls below his or her MMMNA, the shortfall is made up from the nursing home spouse’s income.

Example: Joe Smith and his wife Sally Brown have a joint income of $3,000 a month, $1,700 of which is in Mr. Smith’s name and $700 is in Ms. Brown’s name. Mr. Smith enters a nursing home and applies for Medicaid. The Medicaid agency determines that Ms. Brown’s MMMNA is $2,200 (based on her housing costs). Since Ms. Brown’s own income is only $700 a month, the Medicaid agency allocates $1,500 of Mr. Smith’s income to her support. Since Mr. Smith also may keep a $60-a-month personal needs allowance, his obligation to pay the nursing home is only $140 a month ($1,700 – $1,500 – $60 = $140).

In exceptional circumstances, community spouses may seek an increase in their MMMNAs either by appealing to the state Medicaid agency or by obtaining a court order of spousal support.

Contact your attorney to find out what you can do to make sure your spouse has enough income to live on.

New Law Makes Big Changes to Retirement Plans

January 22, 2020

President Trump has signed a spending bill that makes major changes to retirement plans. The new law is designed to provide more incentives to save for retirement, but it may require workers to rethink some of their planning.

The Setting Every Community Up for Retirement Enhancement (SECURE) Act changes the law surrounding retirement plans in several ways:

  • Stretch IRAS. The biggest change eliminates “stretch” IRAs. Under the previous law, if you named anyone other than a spouse as the beneficiary of your IRA, the beneficiary could choose to take distributions over his or her lifetime and to pass what is left onto future generations (called the “stretch” option). The required minimum distributions were calculated based on the beneficiary’s life expectancy. This allowed the money to grow tax-deferred over the course of the beneficiary’s life and to be passed on to his or her own beneficiaries. The SECURE Act requires non-spouse beneficiaries of an IRA to withdraw all the money in the IRA within 10 years of the IRA holder’s death. In many cases, these withdrawals would take place during the beneficiary’s highest tax years, meaning that the elimination of the stretch IRA is effectively a tax increase on many Americans. This provision will apply to those who inherit IRAs starting on January 1, 2020.
  • Required minimum distributions. Under prior law, you have to begin taking distributions from your IRAs beginning when you reach age 70 ½. Under the new law, individuals who are not 70 ½ at the end of 2019 can now wait until age 72 to begin taking distributions.
  • Contributions. The new law allows workers to continue to contribute to an IRA after age 70 ½, which is the same as rules for 401(k)s and Roth IRAs.
  • Employers. The tax credit businesses get for starting a retirement plan is increased and the new law makes it easier for small businesses to join multiple-employer plans.
  • Annuities. The newly enacted legislation removes roadblocks that made employers wary of including annuities in 401(k) plans by eliminating some of the fiduciary requirements used to vet companies and products before they can be included in a plan.
  • Withdrawals. The new law allows an early withdrawal of up to $5,000 from a retirement account without a penalty in the event of the birth of a child or an adoption. Currently, there is a 10 percent penalty for early withdrawals in most circumstances.

Given these changes, workers need to immediately reevaluate their estate plans. Some people have used stretch IRAs as an estate planning tool to pass assets to their children and grandchildren. One way of doing this has been to name a trust as the IRA’s beneficiary, and these trusts may have to be reformed to conform to the new rules. If a stretch IRA is part of your estate plan, consult with your attorney to determine if you need to make changes.

To read the legislation, click here.  For more on the new law, click here and here.

What the Secure Act is All About

January 22, 2020

by Harry S. Margolis Esq.

As part of the spending bill that recently passed Congress, effective January 1, 2020, new retirement plan rules will apply. They included in the Secure Act, which is an acronym standing for Setting Every Community Up for Retirement Enhancement. A big part of the bill encourages small employers to band together to offer retirement plans, which is the reason for the title. But here’s what may affect you and your family.

  1. Later Required Beginning Age. For those who have not already reached age 70 1/2 by the end of 2019 (meaning they were born on or before June 30, 1949), they can delay taking their required minimum distributions until the April 1st of the year they reach 72, rather than 70 1/2. If you were born after June 30, 1949, you can still choose to withdraw without penalty, other than paying taxes on the amount withdrawn, any time after age 59 1/2, you just don’t have to do so quite as early.
  2. A Shorter Time Period for Withdrawing from Inherited IRAs. Up until now, anyone who inherited a retirement plan who was not a spouse of the deceased owner had to begin taking minimum distributions the following year, but could take them out based on their own life expectancy, meaning that a younger person could stretch out the withdrawals and enjoy the tax deferral for many years. Under the new rules, with some exceptions, inherited IRAs must now be entirely withdrawn within 10 years of the death of the initial owner. This restrictions only applies to those retirement plans inherited after this year.
  3. The Exceptions. The New Inherited IRA rules don’t apply to spouses of the deceased owner who can continue to convert inherited IRAs to their own ownership. In addition, there are exceptions for:
    • minor children,
    • individuals with disabilities and chronic illnesses, and
    • those who are less than 10 years younger than the original owner.

    The exception may also apply to special needs trusts.

  4. You Can Keep Contributing if You Keep Working. Under the old rules, those over age 70 1/2 who continued to work could continue to contribute to their work-related 401(k) plans Roth IRAs but not to their own IRAs. Now they can continue to contribute to traditional IRAs as well. Of course, after age 72 this creates the interesting situation of continuing to contribute at the same time you’re required to withdraw.

The New Rules and Trusts

While these new rules effect no changes for planning with respect to spouses, they may for children and others. Some parents provide for continuing trusts for their children and grandchildren in order to provide creditor or divorce protection or for special needs planning purposes. These are drafted as “accumulation” or “conduit” trusts under complex retirement plan rules. The new rules won’t affect “accumulation” trusts, but some parents may want to change their “conduit” trusts.

“Conduit” trusts get their name because they provide that any required minimum distributions from retirement plans held by the trusts must be distributed annually to the beneficiaries. Parents may have agreed to this provision knowing that such distributions will be relatively small each year since they’re stretched out over the beneficiary’s lifetime. In some instances, they may not want larger distributions made during the first 10 years after their deaths, as would be required as the trusts are currently drafted.


Undoubtedly, unanticipated results will arise as the new rules affect real-life situations. We’ll continue to better understand the impact of the new rules and let you know how the work. Also, don’t hesitate to be in touch or post any questions you might have. We’ll do our best to find answers.

HUD Releases New Condo Rules for Reverse Mortgages

October 15, 2019

The U.S. Department of Housing and Urban Development (HUD) issued a new Mortgagee Letter (ML) late Thursday updating the origination requirement for FHA mortgages on condominium units, applicable to both the traditional, forward mortgage and reverse mortgage programs simultaneously. The letter provides additional clarification ahead of the rule’s implementation on October 15.

“FHA published ML 2019-17, Home Equity Conversion Mortgage (HECM) Program – Condominium Requirements, which outlines the updated origination requirements for HECMs in condominium projects in accordance with the recently published Single-Family (SF) Handbook guidance,” said HUD in a press release. “It also includes certain borrower eligibility requirements for seniors seeking to obtain a HECM for a condominium unit using FHA’s Single-Unit Approval process.”

Read the FHA INFO notice and the full Mortgagee Letter at HUD for further details on the changes.

Last month, HUD announced a forthcoming rule designed to make it easier for condo owners to get reverse mortgages and other FHA financing. The new rules related to condominiums going into effect next month will expand FHA financing for qualified first-time homebuyers as well as seniors looking to age in place, according to an August press memo released by HUD.

“For seniors, part of our mission is to provide affordable options to age in place. Condominiums can make a lot of sense for many seniors [for reasons of affordability],” said FHA Commissioner and Acting Deputy HUD Secretary Brian D. Montgomery on an August conference call with reporters. “Our single unit review now also includes reverse mortgages, known as Home Equity Conversion Mortgages (HECMs), designed to help seniors age in place.”

FHA estimated the new policy will notably increase the amount of condominium projects that will be able to gain FHA approval. 84% of FHA-insured condominium buyers have never owned a home before, according to agency data. Only 6.5% of the more than 150,000 condominium projects in the United States are approved to participate in FHA’s mortgage insurance programs.

Who’s Charging What for Trust Services?

October 8, 2019

Trust fees are headed higher according to our pricing survey completed this week. Some firms work strictly from a rate card. Others decide what your client will pay when the business is placed on the table. Either way, it’s good to know what the “market value” of trust services.

There’s still a fair amount of mystery surrounding exactly what’s baked into each of those basis points. “It’s never as simple as just lining up the fees,” says Mike Flinn, a Phoenix-based trust consultant. “Once you start drilling down into the basis points, it becomes pretty clear that different firms really do different things,” he added. To find out where the sizzle hits the steak for various types of trust company, The Trust Advisor conducted a survey below of what they’re charging.

Who’s Charging What for Trust Services
Trust Company State Trust account minimum Minimum annual fee First $1 million Next $2 to $3 million $3 to $5 million Above $5 million
Advisory Trust DE $500,000 $3,000 0.50% 0.40% 0.30% 0.25%
Bryn Mawr Trust DE $1 million $6,000 0.60% * 0.45% Neg.
The New Hampshire Trust Company NH None $3,000 0.90% 0.55% 0.45% 0.35%
Northern Trust IL & DE $5 million $20,000 0.40% 0.40% 0.40% 0.20%
Reliance Trust GA None $3,000 0.60% 0.35% 0.35% 0.35%
Santa Fe Trust NM None $4,000 0.75% 0.75% 0.50% 0.35%
Saturna Trust Co. NV None $1,000 0.50% 0.50% 0.50% 0.40%
Summit Trust Co. NV $100 $100 1.00% 0.80% 0.70% Neg.
Wealth Advisors Trust Company SD None $4,000 0.50% 0.50% 0.42% 0.35%
Wilmington Trust DE $1 million $8,000 0.60% 0.40% 0.40% 0.25%
* Breakpoint is $2 million.

One thing we discovered: if you just want a no-frills account, Flinn adds, it’s probably going to cost at least $3,000 a year. “That’s really the minimum anyone can comfortably charge.”

“Maybe $2,500,” he conceded. “But at that level, it’s going to be very difficult to stay in the business.”

While $3,000 happens to be what Advisory Trust charges on the low end, it does seem to be an informal sweet spot within the trust industry. Other companies that start at that level include New Hampshire Trust and Georgia-based Reliance Trust.

There are companies that charge small accounts less (Nevada’s Summit Trust will go as low as $100 a year), but plenty start their fees at $4,000 and up. It all depends on the size of account they’re courting and what makes economic sense, Christopher Holtby, president of Wealth Advisors Trust Company, told me.

“Hitting the sweet spot is part art, part science,” he explains. “There are very specific things that every trust has to do, and everything else is extra.”

Good scale for big fish

Northern Trust doesn’t publish its fee scale, but president Dan Lindley was kind enough to give The Trust Advisor a peek.

Although the $20,000 minimum fee looks steep at first, it makes a lot more sense when you consider that Northern Trust isn’t really interested in personal directed trust accounts with less than $5 million in assets. For a client with that kind of wealth, the $20,000 translates into at most 40 basis points a year—pretty low by industry standards.

(Really big clients get institutional-strength discounts. Once a Northern Trust account grows beyond $30 million, the company will only charge 5 basis points: $500 a year per $1 million.)

The upshot is that by concentrating on high-end clients, a white-glove firm like Northern Trust can build a lot of sizzle into its steak, even though the cost per dollar of AUM is comparable to what bare-bones vendors charge.

“Northern Trust in Delaware charges a reasonable, competitive fee and in return provides comprehensive services to our directed trust clients backed by more than 120 years of experience as a fiduciary,” Lindley told me.

Other high-end trust companies argue that at this level, it’s pointless to advertise your fees because high-net-worth clients and their advisors are happy to pay for the service.

Some vendors refused to participate in the survey because they either work on an a la carte basis (Peak Trust) or figure out what to charge once they see the trust paperwork (Commonwealth Trust). As Peak Trust founder Douglas Blattmachr told me, it’s pointless to advertise how much a generic offering would cost when the fact is that at this level, one size fits none.

“It really does depend on what the client wants us to provide,” he says.

When asked to present a benchmark, he estimated that a relatively bare-bones Peak Trust account might charge 50 basis points a year or an annual minimum of $3,500. That’s about where vanilla Commonwealth trusts start, Jim McMackin, who runs the company’s marketing, told me.

Splitting smaller pies

Naturally, it’s going to cost extra if the trust company also manages the underlying assets. But there are a lot of vendors out there that are happy to offload the investment responsibilities and knock a bit off their fees in return.

Companies like Wealth Advisors Trust, Advisory Trust and Santa Fe Trust, cater exclusively to investment advisors looking for a place to refer their clients who need to open a trust.

Account minimums tend to be relatively low—Wealth Advisors Trust and Santa Fe Trust can theoretically start a trust with as little as $1—but expenses can be a little higher to cover the fixed cost of administering these tiny trusts.

For example, Santa Fe Trust accepts very small accounts, but according to its published fee scale it will still charge them at least $4,000 a year. At an annual fee of 75 basis points, this suggests that a trust really needs to have more than around $533,000 in it to “earn out” that $4,000 minimum fee.

By comparison, Wealth Advisors Trust’s scale “earns out” at a slightly higher level ($800,000 in the account), which indicates that its platform is built to support a somewhat more affluent clientele. Others on our list (Advisory Trust, Reliance, Saturna, New Hampshire Trust) justify their minimums at lower levels.

Whatever happens, says Kathy Roberts, the CEO of Santa Fe Trust, small accounts shouldn’t be loss leaders.

“We don’t take a trust that isn’t going to be profitable,” she told me.  While she’ll take on a tiny trust if the grantor insists, she warns that advisors should recognize that the trust company will pass on the cost of running it and sometimes it just doesn’t make sense.

Where we go from here

Most of the people I talked to say the cost of running a trust has already gone about as low as it can go.

Mike Flinn from Advisory Trust and Douglas Blattmachr of Peak Trust agree that the cost of fiduciary compliance and routine service probably isn’t going any lower than around $3,000 per trust any time soon, especially given the current trend toward higher regulation.

“It’s expensive to be a fiduciary,” Blattmachr acknowledged in our conversation. “So that provides a floor on what people can offer.”

But beyond that level, technology keeps improving and letting efficient trust companies bring down their overall cost proposition. Blattmachr says low-end players can use technology to better serve the mass market. Kathy Roberts of Santa Fe Trust agrees.

Either way, Christopher Holtby of Wealth Advisors Trust told me that there’s always room for enthusiastic competitors.

“Wherever fees go,” he says, “there are going to be a lot more entrants in the trust service business.”

Scott Martin, contributing editor, The Trust Advisor.  

Medicaid’s Asset Transfer Rules

October 8, 2019

In order to be eligible for Medicaid, you cannot have recently transferred assets. Congress does not want you to move into a nursing home on Monday, give all your money to your children (or whomever) on Tuesday, and qualify for Medicaid on Wednesday. So it has imposed a penalty on people who transfer assets without receiving fair value in return.

This penalty is a period of time during which the person transferring the assets will be ineligible for Medicaid. The penalty period is determined by dividing the amount transferred by what Medicaid determines to be the average private pay cost of a nursing home in your state.

Example: If you live in a state where the average monthly cost of care has been determined to be $5,000, and you give away property worth $100,000, you will be ineligible for benefits for 20 months ($100,000 / $5,000 = 20).

Another way to look at the above example is that for every $5,000 transferred, an applicant would be ineligible for Medicaid nursing home benefits for one month. In theory, there is no limit on the number of months a person can be ineligible.

Example: The period of ineligibility for the transfer of property worth $400,000 would be 80 months ($400,000 / $5,000 = 80).

A person applying for Medicaid must disclose all financial transactions he or she was involved in during a set period of time — frequently called the “look-back period.” The state Medicaid agency then determines whether the Medicaid applicant transferred any assets for less than fair market value during this period.  The look-back period for all transfers is 60 months (except in California, where it is 30 months).  Also, keep in mind that because the Medicaid program is administered by the states, your state’s transfer rules may diverge from the national norm.  To take just one important example, New York State does not apply the transfer rules to recipients of home care (also called community care).

The penalty period created by a transfer within the look-back period does not begin until (1) the person making the transfer has moved to a nursing home, (2) he has spent down to the asset limit for Medicaid eligibility, (3) has applied for Medicaid coverage, and (4) has been approved for coverage but for the transfer.

For instance, if an individual transfers $100,000 on April 1, 2017, moves to a nursing home on April 1, 2018, and spends down to Medicaid eligibility on April 1, 2019, that is when the 20-month penalty period will begin, and it will not end until December 1, 2020.

In other words, the penalty period would not begin until the nursing home resident was out of funds, meaning there would be no money to pay the nursing home for however long the penalty period lasts.  In states that have so-called “filial responsibility laws,” nursing homes may seek reimbursement from the residents’ children. These rarely-enforced laws, which are on the books in 29 states, hold adult children responsible for financial support of indigent parents and, in some cases, medical and nursing home costs.  In 2012, a Pennsylvania appeals court found a son liable for his mother’s $93,000 nursing home bill under the state’s filial responsibility law.


Transferring assets to certain recipients will not trigger a period of Medicaid ineligibility. These exempt recipients include the following:

  • A spouse (or a transfer to anyone else as long as it is for the spouse’s benefit)
  • A trust for the sole benefit of a blind or disabled child
  • A trust for the sole benefit of a disabled individual under age 65 (even if the trust is for the benefit of the Medicaid applicant, under certain circumstances).

In addition, special exceptions apply to the transfer of a home. The Medicaid applicant’s home may be transferred to the individuals above, and the applicant also may freely transfer his or her home to the following individuals without incurring a transfer penalty:

  • A child who is under age 21
  • A child who is blind or disabled (the house does not have to be in a trust)
  • A sibling who has lived in the home during the year preceding the applicant’s institutionalization and who already holds an equity interest in the home
  • A “caretaker child,” who is defined as a child of the applicant who lived in the house for at least two years prior to the applicant’s institutionalization and who during that period provided care that allowed the applicant to avoid a nursing home stay.

Congress has created a very important escape hatch from the transfer penalty: the penalty will be “cured” if the transferred asset is returned in its entirety, or it will be reduced if the transferred asset is partially returned. However, some states are not permitting partial returns. Check with your elder law attorney.

What Type of Burial Assistance Does the Government Provide?

September 3, 2019

August 20, 2019 | by the National Care Planning Council

General Observations

Death and dying are issues typically overseen by the states. There are very few federal programs to help with burial as compared with numerous federal programs for eldercare. Only when death is a consequence of participation in a federal program is it covered. For example, assistance for burial is covered by Social Security, the Department of Veterans Affairs for veterans, the Department of Defense for military and some minimal support from Medicaid through Medicaid matching funds for states.

States, counties and cities themselves typically offer little assistance for burial unless the deceased is indigent and no funds can be found to pay for cremation or burial. And in many states, the only indigent people who are covered are those who die and the body remains unclaimed. In these cases, local county governments have no recourse but to cover the cost of a cremation. There are some exceptions to this general practice of no support with some states, but over the years more and more states have opted out of programs to help families with burial costs.

By and large, responsibility for funerals and burial or cremation rests with the family. It is therefore very important when planning for the final years of life to have money set aside or available for death. We will discuss below a number of community support options for those who do not prepare. In general, very few community or government assistance programs will pay for a burial. Cremation is generally the rule. A funeral service is optional for the family but typically not paid for with assistance funds.

Social Security Death Benefit

You may receive a one-time payment of $255 when a family member dies, depending on your relationship to them and how long they have worked. Generally, only surviving spouses and children of deceased workers qualify for the one-time death benefit. In addition, the deceased family member must have worked long enough to be insured under Social Security, but it doesn’t matter if they were already collecting Social Security or not.

The death benefit payment is made to the surviving spouse living with the deceased person at the time he or she passed, or if there is no surviving spouse, the payment is made to a child of the deceased person. Spouses who are not living together when one spouse dies may still receive the death benefit if they were eligible for benefits on the deceased spouse’s earnings in the month the spouse passed. If there is no surviving spouse or child who qualifies for the payment, then no payment will be made.

This is a one-time, lump sum benefit; however some survivors may qualify for a monthly benefit in addition to the one-time death benefit. You must apply for the lump-sum death benefit within two years of the family member’s death.

In addition to the one-time payment, certain family members may receive a monthly benefit for a deceased person. For widows or widowers without dependents, this amounts to receiving the larger of the two social security benefits if both were receiving benefits or receiving the deceased person’s benefits if the survivor was not receiving any. The following family members may qualify for Social Security survivor benefits:

  • a widow or widower, beginning at age 50 if disabled or 60 is not disabled;
  • a widow or widower who is caring for your child under the age of 16, regardless of the age of the widow or widower,
  • unmarried children of the deceased also qualify if they are under age 18 (or age 22 if they are disabled).
  • in some cases, even grandchildren, step children or adopted children may qualify for survivor benefits.

If you are divorced, you may qualify for survivor benefits on an ex-spouse if you were married for at least 10 years, and you are age 60 or older when your ex-spouse passes (you only need to be age 50 if you are disabled).

You should notify Social Security and apply for Social Security benefits right away after a family member has passed. To do so, you can call the Social Security Administration or visit the closest office to you. You will need to provide proof of death (death certificate or proof from a funeral home), your Social Security number and your deceased family member’s Social Security number, your birth certificate, marriage certificate if married, divorce papers if you are divorced, and income information for the deceased family member (from W-2s or income tax returns) for the most recent year

Veterans Death Benefits

These monetary benefits are for veterans who were receiving disability income from either Disability Compensation or Veterans Pension.



NON-SERVICE CONNECTED DEATH (Reimbursement; veteran dies while hospitalized by VA)


NON-SERVICE CONNECTED DEATH (Reimbursement for Veterans not hospitalized by VA)


NSC DEATH STATE CEMETERY (Paid to a state veterans cemetery for the plot/burial)


NSC DEATH PLOT ALLOWANCE (This amount will be paid to reimburse for a private-paid plot)


A service-connected death is one where the veteran was receiving monthly payments for Disability Compensation and the death was due to the disability or condition for which the veteran was receiving pay. It is also possible to receive a service-connected death if the disability or condition was not the direct cause but the disability or condition contributed substantially to the death.

A non-service-connected death is one where the veteran was receiving monthly payments for Disability Compensation or Veterans Pension but the death was due to some other cause not related to the disabilities or conditions for which the veteran was receiving pay.

It should be noted that generally a non-service-connected death can produce $1,062 a month if the survivors have to pay for a funeral plot. Note that if the veteran died while hospitalized by VA and the survivor has to pay for a funeral plot the total amount available is $1,524.

Disaster Associated Burial Benefit

The most tragic disaster-related loss imaginable is that of a loved one. Under the Individuals and Households Program’s (IHP) Other Needs Assistance (ONA) provision, an applicant may qualify for certain eligible funeral expenses.

FEMA Funeral Assistance is provided to help with the cost of unexpected and uninsured expenses associated with the death of an immediate family member when attributed to an event that is declared to be a major disaster or emergency.

Eligible funeral expenses may include:

  • Cost of casket
  • Mortuary services
  • Transportation of the deceased and/or up to two family members into the area to identify the decedent (if required by state/local authorities)
  • Two Death Certificates
  • Burial plot
  • Interment or cremation
  • Cost of re-interment if disinterment is a) caused by the declared disaster, and b) occurs in a family cemetery on private property
  • Eligibility Criteria

Typically, federal and state personnel at the FEMA Joint Field Office review the supporting documentation from the applicant and payments are approved by the Federal Coordinating Officer (FCO) or designee and his/her state counterpart.

To be eligible for funeral assistance, applicants must provide:

  • A death certificate for the decedent
  • Documentation from a designated, authoritative state or local entity (attending physician, Medical Examiner’s office, or Coroner’s Office as appropriate) that attributes death or the injury causing death to the declared emergency or major disaster
  • Proof that the applicant is the official “next of kin” as defined by the appropriate state or local authority
  • Confirmation that funeral expenses have not been paid for by other resources (Social Security and Veterans Affairs benefits, for example, would duplicate Funeral Assistance and would be subtracted from an award)
  • Evidence of an unmet funeral expense (a receipt from a service provider)
  • Ineligible Costs

Not all applicants reporting funeral expenses will be eligible for Funeral Assistance. Some common reasons for ineligibility include:

  • The death was not attributed to the declared incident
  • Funeral expenses are fully covered by other sources of assistance
  • Insufficient and/or incomplete documentation
  • If disinterment was the result of the disaster, FEMA will provide Funeral Assistance only for a disinterred coffin under the following conditions:
  • The unearthed coffin(s) were located in a family cemetery on their private property
  • The coffin(s) were removed from the ground by the declared disaster

Private Sector and Community Programs

There are a number of ways where the private sector and certain community groups or church denominations will help cover a burial and possibly a funeral.

Taxpayer Interment Benefits

Local taxpayers in many cities and counties qualify for reduced interment costs in cemeteries.

Church Members and Members of Civic Organizations Benefits

Church members and members of civic and other organizations may qualify for funeral assistance or for reduced costs. Some church denominations will also provide burial for their members in the church cemetery. This is principally for Greek Orthodox, Jewish and Catholic faiths but may include other faiths as well.

Crime Victims’ Compensation Fund

A Crime Victims’ Fund often provides funeral benefits in instances of death by a criminal act. There are many crime victim funds across the United States. Most are funded by the state or county. Ask the prosecutor’s office in your area or do a computer search using the name of your county or city and the term “crime victim fund”.

Death Benefits from Pensions, Societies and Other Organizations

Organizations affiliated with some professions, such as the Railroad Retirement Board, as well as some social groups, unions and pensions, offer allowances to defray funeral costs. Some organizations and pension funds include an automatic group life insurance policy on their members. This may include unions and other fraternal organizations as well as veterans service organizations. These may be small amounts of coverage such as $1,000, but adding up benefits from a number of sources might produce enough for a burial or cremation. Here are some examples of funds that will defray costs.

  • Workman’s compensation, if death was work-related,
  • Civil service (federal, state, county or local) retirement pension fund,
  • Federal Employees Life Insurance (Includes a lifetime benefit even after retirement)
  • Railroad fund,
  • Teacher’s fund,
  • Miner’s benefits fund,
  • Trade union fund,
  • Credit union fund,
  • Fraternal organizations fund.

Discounts or Gratis Services from Funeral Homes

For families who simply cannot come up with enough money to bury a loved one, funeral homes may be surprisingly accommodating. Even though they may not advertise it, funeral homes may offer charity for a number of people in the community when no other way to bury a loved one is possible. This might include steep discounts, extended monthly payment plans, extremely affordable economy plans and possibly even providing the burial — in this case very likely a cremation — for free.

Estate Planning with Cryptocurrency

July 31, 2019

courtesy of Elder Law Answers:

As cryptocurrencies like BitCoin, LiteCoin, and Ripple increase in circulation and longevity, estate planning attorneys are likely to see more clients acquiring these assets and incorporating them into their estate plans. As interest in cryptocurrencies has increased, the IRS is paying more attention to these kinds of assets. For example, just last year, a popular cryptocurrency exchange called Coinbase was court-ordered to release transaction information on approximately 13,000 of its users to the IRS, indicating that the IRS is beginning to monitor cryptocurrency transactions closely. Ryan Derousseau, The IRS Is Coming for Your Cryptocurrency Profits, Money Time (2018).

Although there is little authority on the tax treatment of cryptocurrency to date, attorneys should be aware of the ins and outs of this specialized property in order to create the best estate plans for clients holding cryptocurrency and properly administer the estates of deceased clients who owned cryptocurrency at their death.

What is Cryptocurrency?

Although over 1,000 different versions of cryptocurrencies exist, the essential hallmarks remain the same for nearly all of them. All Cryptocurrencies, (2018), At its core, a cryptocurrency is a digital currency that uses blockchain technology to create a decentralized, immutable, public digital ledger. Cryptocurrencies are available only in digital form, which means that in order to use a cryptocurrency one must have access to a computer or smartphone device. The blockchain is a “digital ledger that is shared across a decentralized network of independent computers, which update and maintain it in a way that allows anyone to prove the record is complete and uncorrupted.” Michael J. Casey & Paul Vigna, The Truth Machine: The Blockchain and the Future of Everything (2018). Using this digital ledger, individuals can earn, purchase, and sell digital currency, or “cryptocurrency,” through a network of independent computers that track all of the payments through complex algorithms.

Transfers of cryptocurrency are accomplished through the blockchain technology. The transferor enters the transferee’s public address where the transferee will receive the cryptocurrency, along with the transfer amount and an optional note into the digital ledger. Once those pieces of information are entered, the transferor simply needs to press “send,” and the decentralized network of independent computers will validate the transfer. The transferee need not to do anything besides share his public address. Once the transfer is validated, the ledger is updated to reflect that the transfer has been made. No other documentation is required for the transfer to be complete.

Although cryptocurrency can be treated under various laws like conventional fiat currency (i.e., cash), the IRS’s current position is to treat cryptocurrency as property and not currency for tax purposes. US Dept. of the Treasury, Internal Revenue Service Notice 2014-21, Washington: GPO (2014), In a 2014 notice (Notice 2014-21), to date the most comprehensive guidance from the IRS on cryptocurrency tax issues, the IRS stated that “[f]or federal tax purposes, virtual currency is treated as property. General tax principles applicable to property transactions apply to transactions using virtual currency.” Id. As a result, when creating an estate plan or administering an estate, it is important to view any cryptocurrency in an estate as property rather than currency. Among other things, this means that the transfer of cryptocurrency can result in losses or gains. For example, cryptocurrency can be converted into fiat currency, which may result in a loss or gain. Unlike stock, however, cryptocurrency does not pay dividends, and unlike bonds or certificates of deposit, cryptocurrency does not accrue interest either. Rather, cryptocurrency increases (or decreases) in value like real estate. The market capitalization for all cryptocurrencies as of the date of this article is approximately $122 billion. Sam Ouimet, Bitcoin Pops Above $3,700 As Crypto Market Flashes Green, Coindesk (2019),

Why Are Some People Interested in Cryptocurrency?

Cryptocurrency has characteristics that are enticing to certain classes of risk-taking investors, traders, or speculators. Because of the semi-anonymous nature of the cryptocurrency market, there are typically few to no privacy concerns for individuals making transactions with cryptocurrency. Compared to bank accounts, there are few tax or other regulatory reporting requirements for account holders. This itself has attracted numerous holders. Advocates say that because cryptocurrency relies on the distributed ledger of blockchain technology, it protects holders from the risks associated with cyberattacks on banks and other traditional holders. This, too, is attractive to some.

People have started to use cryptocurrency as a flexible holder of value. For example, cryptocurrency can be used to secure loans. Will Yakowicz, Bitcoin Millionaires Have a New Way to Cash Out Without Ever Selling a Single Bitcoin, (2018), Loans backed by cryptocurrency allow for cryptocurrency owners to put this asset to use without “cashing out” their cryptocurrency and therefore potentially incurring negative tax consequences as a result (discussed in detail below). Another method of investing cryptocurrency holdings and deterring taxes is through an individual retirement account (IRA) that owns 100 percent of an LLC invested in cryptocurrency. Jeff Vandrew Jr., How to Hold Cryptocurrency in a Retirement Account—Without Fees, Bravenewcoin (2018); see also Investing in Cryptocurrency using an IRA, NuView Trust Company,

To its backers, cryptocurrency is the money of the future and, just as platforms like Uber, Airbnb, and eBay have disrupted and replaced traditional middlemen, so too will cryptocurrency replace banks and other traditional financial intermediaries. In the meantime, cryptocurrency fans believe there are appreciation opportunities available to those who purchase at what they perceive to be the early stages in the life of this asset class.

What Are Some of the Downsides to Cryptocurrency?

Cryptocurrency is a relatively new type of asset that began when the Bitcoin network came into existence in January 2009. Benjamin Wallace, The Rise and Fall of Bitcoin, Wired (Nov. 23, 2011). As a result, there are many issues surrounding cryptocurrency that have yet to be settled. On May 30, 2018, the American Institute of Certified Public Accountants (AICPA) sent a letter to the IRS requesting additional guidance on the taxation of cryptocurrency, beyond its initial 2014 notice. Annette Nellen, Re: Updated Comments on Notice 2014-21: Virtual Currency Guidance (2018), This is the second letter of this nature AICPA has sent to the IRS, the first having been sent in 2016. The ABA’s Tax Section also sent a similar letter seeking advice from the IRS on the taxation of certain aspects of cryptocurrency on March 19, 2018. Karen L. Hawkins, Re: Tax Treatment of Cryptocurrency Hard Forks for Taxable Year 2017 (2018),

Some of the guidance sought in these letters includes what types of retirement accounts may hold cryptocurrency, whether a charitable contribution of cryptocurrency valued in excess of $5,000 will be treated the same as contributions of publicly traded stock, which do not require a qualified appraisal, and whether taxpayers may choose either the specific identification method or the first-in-first-out method as the accounting method for computing capital gains and losses. Id. To date, many of these issues remain unresolved.

One major taxation aspect that the IRS has addressed regarding cryptocurrency is capital gains and losses. Because the IRS treats cryptocurrency as property for tax purposes, an exchange or sale of cryptocurrency can lead to capital gains or losses. Failure to report these and other cryptocurrency transactions on a timely-filed income tax return can lead to fines and even possibly prison time, as taxpayers were warned by a letter released by the IRS in March 2018. Internal Revenue Service, IRS Reminds Taxpayers to Report Virtual Currency Transactions, (2018), As a result, any trust holding cryptocurrency that wishes to liquidate cryptocurrency assets in order to make a distribution to a particular beneficiary should be aware of and properly report any capital gains or losses that ensue from the liquidation.

In addition, the SEC guidance on cryptocurrency is a work in progress. As of now, the SEC says that Bitcoin is not subject to regulation as a security, but it has noted that many cryptocurrencies are subject to regulation as securities, even as many of those issuers have not made the required regulatory filings. Louise Matsakis, Rest Easy, Cryptocurrency Fans: Ether and Bitcoin Aren’t Securities, Wired (June 14, 2018), See also Bob Pisani, Bitcoin and Ether are not Securities, but Some Initial Coin Offerings May be, SEC Official Says, CNBC (June 14, 2018),

Making Gifts with Cryptocurrency

Some individuals may be interested in making gifts of cryptocurrency in order to reduce income taxes accruing on their holdings. Even better, by donating appreciated cryptocurrency to qualified charities, the taxpayer can receive a charitable deduction on her income taxes for the gift and avoid paying capital gains taxes on the appreciation. Robert W. Wood, Tax-Free Ways to Transfer Bitcoin and Other Crypto: Expert Take, Cointelegraph (2018), In fact, charitable organizations sometimes welcome donations in the form of cryptocurrency, as the transfer of cryptocurrency requires less red tape than a typical wire transfer. 12 Nonprofits that Accept Cryptocurrency, [Blog] WeTrust (2018),

As noted earlier, the IRS’s current position treats cryptocurrency as property. See Notice 2014-21, supra.Therefore, gifts of cryptocurrency should be treated for tax purposes as gifts of property, in which the donee receives the donor’s cost basis in the property. As a result, when making a gift of cryptocurrency, it is important to properly track the basis of the gift. According to Notice 2014-21, a taxpayer’s basis in cryptocurrency that the taxpayer receives for goods and services is equal to the fair market value of the cryptocurrency on the date the taxpayer received it. Id.

For tax purposes, best practices for giving cryptocurrency include getting an appraisal of the fair market value of the cryptocurrency being gifted and executing a contemporaneous memorandum that includes details of the gift, such as the date of the transfer, the donor’s basis in the gift, and the fair market value of the gift at the time of the transfer, because blockchain transactions are anonymous. Although there is no authority on this issue, the memorandum should also include that the donor has given up control or dominion over the donee’s cryptocurrency address to verify that the gift is complete and, if the gift is being made to a charitable organization, that the gift meets the requirements of IRC § 170(f), to record that it qualifies for an income tax charitable deduction.

Cryptocurrency in Estates

Cryptocurrency has at least one procedural advantage over other financial assets in estate administration. Unlike a traditional bank or broker, which typically requires executors to produce an original death certificate and letters testamentary in order to take control of accounts in the deceased owner’s estate, cryptocurrency merely requires the fiduciary to have the decedent’s passcode to access and transfer the account for estate administration purposes. Sudhir Khatwani, Bitcoin Private Keys: Everything You Need to Know, CoinSutra—Bitcoin Community, (2018) The fiduciary then would hold the complex, multi-character passcode needed to access, invest and distribute the estate’s cryptocurrency assets to the beneficiaries as needed and as permitted by the relevant estate planning document. J.P. Buntinx, What Are Cryptocurrency Trusts, NullTX (2018), Because cryptocurrency offers ease of administration, there are fewer checks on a fiduciary who is handling a cryptocurrency account. Individuals who own cryptocurrency or have a trust that holds cryptocurrency should be exceptionally cautious when selecting an executor or trustee because the fiduciary could use the passcode to access and manage the cryptocurrency account, unlike a traditional bank account, which provides more oversight. In addition, should the fiduciary make a transfer of cryptocurrency that is not authorized by the relevant estate planning document, the transfer could be traced but would be nearly impossible to recover.

Although providing the passcode to the fiduciary may seem like the easiest method, it is important to ensure that doing so does not violate any federal or state privacy laws, terms of service agreements, or computer fraud and data protection laws. Such laws may include the Uniform Prudent Investor Act, the Uniform Prudent Management of Institutional Funds Act, the Federal Computer Fraud and Abuse Act, and the Revised Uniform Fiduciary Access to Digital Assets Act. In addition, by requiring only the passcode to access the cryptocurrency account, there is no way to ensure that a former fiduciary who has been replaced by a successor fiduciary does not access the account despite the lack of fiduciary authority to do so.

There are certain technological controls that can be employed to reduce this risk. “Cold storage” is a method used to keep cryptocurrency account information offline, adding an extra layer of security for cryptocurrency accounts. How to Setup Bitcoin Cold Storage, (2017), Through cold storage, a USB drive or similar device contains the account’s passcode concealed from users and privately transmits the passcode without the user knowing the passcode personally in order to access the account. In this way, a trust’s cold storage USB drive can be handed from a former fiduciary to the successor fiduciary without the former fiduciary retaining the passcode and without either fiduciary directly knowing the passcode themselves. Even with cold storage, fiduciaries should still take care to not run afoul of any terms of service that apply to the cryptocurrency account.

One downside to the cold storage method is that it is unclear whether the device or the cryptocurrency itself constitutes tangible personal property in an estate. Although Notice 2014-21 provides that cryptocurrency is “property” for tax purposes, it is silent on the nature of that property. As a result, until these issues have been more fully settled, it is important to carve out this exception when disposing of tangible personal property through an estate planning document.

In addition, because the IRS treats cryptocurrency as property rather than currency, it will most likely require an appraisal for estate tax purposes. Notice 2014-21 provides that the fair market value of cryptocurrency is based on the exchange rates at the relevant date for appraisal purposes. See Notice 2014-21, supra.

Estate Planning Techniques

When planning an estate, it is crucial to obtain information on any cryptocurrency held by the individual and to include language in the estate planning documents that permits fiduciaries to access, retain, and manage the cryptocurrency without extraneous liability. Fiduciaries should be made aware of the existence of cryptocurrency in the estate and should inquire with the decedent’s family members and financial advisors to determine whether the decedent owned cryptocurrency at death. Properly drafted estate planning documents will also permit fiduciaries to access the decedent’s digital assets, such as laptops and cell phones, which may have information about any cryptocurrencies owned by the decedent at death. It is important to provide these powers to the fiduciaries in an estate in order to allow the fiduciaries to access the decedent’s cryptocurrency after death. Even if the decedent provides the fiduciary with her cryptocurrency passcode during her life, the fiduciary’s use of the passcode after death without the proper permissions in the decedent’s estate planning documents and related laws could cause the fiduciary to violate federal or state privacy laws, terms of service agreements, or computer fraud and data protection laws. It is generally not recommended that an individual share her passcode with others for security reasons, but once a passcode is lost it is virtually impossible to recover, so individuals with cryptocurrency should consider writing down the passcode and storing it in a secure but accessible location (or multiple locations).

In theory, to fund a trust with cryptocurrency directly, one could simply provide the trustee with the passcode or the cold storage device for the cryptocurrency account to access and manage the account on behalf of the trust. As noted earlier, however, it is important to ensure that doing so does not violate any applicable laws or terms of service agreements. Because cryptocurrency’s history thus far is short—about ten years as of the date of this article—and volatile, it may be more prudent to hold cryptocurrency as a small part of a larger trust portfolio. Benjamin Wallace, The Rise and Fall of Bitcoin, Wired (Nov. 23, 2011). At a minimum, a cryptocurrency investor who wants to establish a trust holding solely cryptocurrency should release a trustee from any duty to diversify and provide the trustee with the necessary indemnification. If the trust’s cryptocurrency were held in a larger portfolio with a financial institution, the institution would simply change the trustees on its forms as needed.

Currently there is no authority preventing the funding of any trust with cryptocurrency or directing how such transfers should be memorialized for tax purposes. Ivan Taback & Nathaniel Birdsall, The Bitcoin GRAT, Wealth Management (2014), Therefore, it is important to prepare contemporaneous memoranda recording any transfer and to ensure that the donor has not retained any control over the transferred cryptocurrency (for example, by having access to the trust’s private cryptocurrency key). Id.

Leaving aside the all-important fact that the value of cryptocurrencies has to date proven extremely volatile, certain intermediaries have proven untrustworthy, and its regulatory framework is unclear, a believer in the future of one or more particular cryptocurrencies could find them well-suited in an irrevocable family trust that will pass the appreciated property to later generations. An individual who owns cryptocurrency could establish an irrevocable family trust with her children, grandchildren, and later generations as beneficiaries and fund it with a variety of assets, including her cryptocurrency holdings, as briefly described above. If cryptocurrencies increase in value over time, the appreciated value of the cryptocurrency in the trust would pass to the grantor’s descendants free of any estate taxes or further gift taxes. In this way, greater wealth can be passed down to later generations while avoiding unnecessary death taxes that would be incurred if the cryptocurrency had not been placed in a trust.

A grantor retained annuity trust (GRAT) may also be a useful vehicle for cryptocurrency because of its volatility. A GRAT funded with cryptocurrency is relatively easy for a trustee to administer. Id. A GRAT can be funded with cryptocurrency by employing the best practices for cryptocurrency transactions recommended above, including a qualified appraisal of the value of the cryptocurrency transferred to the GRAT upon which the annuity amount of the GRAT will be based. If the trustee also opens up a simple bank account for the GRAT at the time of funding, the trustee can use the power of substitution to exchange the cash in the bank account for cryptocurrency in the GRAT that has appreciated significantly, thus locking in the increased value of the cryptocurrency. Id.

An annuity payment is made with cryptocurrency by the trustee sending it to the grantor’s public cryptocurrency address as briefly described above. Once an actuary determines the annuity amount in regular currency, the trustee will need to determine how much cryptocurrency is necessary to satisfy the annuity payment. Because the IRS has deemed cryptocurrency to be property for tax purposes, the value of cryptocurrency for these purposes would be the price at which the property would change hands between a willing buyer and a willing seller on the date of the transfer. Treas. Reg. 25.2512-1 (2019). Best practices for determining the value of the cryptocurrency needed to satisfy the annuity include taking a weighted average of the mean between the highest and lowest cryptocurrency prices from multiple cryptocurrency exchanges. Taback & Birdsall, supra.


Cryptocurrency is a new asset class that estate planning attorneys are likely to see in their clients’ portfolios in the future. Although the IRS has not set forth clear guidance on every tax aspect of these assets, attorneys should take care to ensure that they are properly treated in the estate plan. It is important to include language in every will and trust that permits the fiduciaries to access the digital records necessary to properly administer any cryptocurrency in the estate. It is also important for clients to select trustworthy fiduciaries who will properly manage the cryptocurrency and follow the client’s intent. With proper planning and attention to the latest publications from the IRS regarding this asset, estate planning attorneys can help their clients who are interested in this new asset class.

By Parker F. Taylor, Vanessa A. Woods, and Jack Tanenbaum

Federal employees soon will have more options to withdraw money from their retirement accounts

July 1, 2019

courtesy NAELA eBulletin:

By Eric Yoder   May 30

Current and former federal employees and military personnel soon will have more options when it comes to withdrawing money from their retirement accounts.

The Thrift Savings Plan is on schedule for a September launch of new account withdrawal options that will remove restrictions that have long been a sore point for many investors, TSP officials said Wednesday at a meeting of the program’s governing board.

Those changes — most applying to those who have left the government but some applying to those still working — result from legislation enacted in late 2017 that gave the TSP two years to carry them out. The Thrift Savings Plan is a 401(k)-style retirement savings plan for federal employees and military personnel, with 5.9 million account holders who had $591 billion on investment as of the end of April.

Although those who leave the government for retirement or other reasons may leave their accounts in place, the limited withdrawal choices have been cited as a main reason so many transfer the money to an individual retirement account or other tax-favored savings plan instead — 36 percent do so within a year.

In the most recent investor satisfaction survey, in 2013, withdrawal choices ranked the second-lowest among the seven features of the program that were rated.

Account holders are “going to have a lot better withdrawal options. They’ve been very limited in the past and I think it’s going to be very beneficial,” said board chairman Michael Kennedy, a managing director in the Atlanta office of Korn/Ferry International, a management consulting firm.

Although the Thrift Savings Plan is a federal agency, it is self-funding and operates much like a corporation, with a chief executive officer overseen by a governing board.

Currently, account holders who leave federal employment or active military duty have three basic withdrawal options that they can use alone or in combination: take a lump-sum cashout or transfer to another account, purchase an annuity, or draw out equal monthly payments.

However, only one partial withdrawal is allowed, and any second withdrawal choice must apply to the entire remaining balance. Further, for those who have both traditional pretax balances and “Roth IRA” after-tax balances, withdrawals must be taken proportionately from both.

Under the new policies, to be effective Sept. 15, those who separate from the government will be allowed to take partial withdrawals as often as once every 30 days, and those with both types of balances will be allowed to take the money from one or the other in addition to prorating.

Further, installment payments could be taken quarterly or annually in addition to monthly, and the amounts could be changed at any time rather than just once a year.

One change will affect current employees and active duty military personnel who are over age 59½ . They may now may take a one-time “age-based” withdrawal without a tax penalty, which forfeits the right to take a later partial withdrawal. Instead, up to four age-based withdrawals per year will be allowed, with no impact on post-separation withdrawals.

Ravindra Deo, executive director of the board, said the changes could motivate some investors to decide to stay with the Thrift Savings Plan since “they want more flexibility and this will give it to them.” He said that by transferring out, investors are passing up advantages including investment fees that are much lower than those charged by mutual funds and other investment vehicles.

However, some investors still may have good reasons to move their money out of the TSP, he said, including those with only small accounts they wish to close out and, by contrast, those with substantial savings plus other investments that they want to consolidate. For them, “I don’t know if this will make enough of a difference” to motivate them to stay, he said.

“This is going to be a great benefit for the program and the participants,” said Clifford Dailing, secretary-treasurer of the National Rural Letter Carriers’ Association. “This is a request that we’ve been hearing from our members for some time. Many of them have been putting their money in other investments where they could have better control.”

“I think some have been making bad decisions because of a misunderstanding that once they retire they need to withdraw the account and reinvest it, which is inaccurate,” added Dailing, chair of a separate advisory board of federal employee organizations that met jointly with the TSP’s board.

At the meeting, officials outlined plans to inform account holders about the new options through electronic newsletters, webinars and other communications. Investors will be encouraged to make any changes through a feature being developed for the TSP website, although new paper forms also will be offered.

“We’re trying to make sure we implement it and roll it out the right way,” Kennedy said. “We’ll have to do a real good job of educating people.”

Other changes ahead, officials said, include making mandatory the now voluntary use of two-factor authentication to access an account, offering target-date investment funds in five-year increments rather than the current 10 years, and increasing the default investment for newly hired employees from 3 to 5 percent of salary. The first of those is targeted for later this year, while the other two are projected for July and October 2020 respectively.