Time & Life Update Newsletter

Top Strategies for 2011 Mid-Year Tax Review and Life-Care Planning

Posted by Dennis Sullivan & Associates on Jul 22, 2011 12:23:00 PM

There are many reasons to consider a mid-year tax and financial review.  At this time last year, income tax planning was particularly challenging.  As a result of mid-December's last-minute legislation, which renewed many already expired deductions, there is much less uncertainty involved in tax planning for 2011. 

As such, you might consider that a mid-year review provides you more time to plan as well as to implement tax or other savings steps.  In this newsletter, we shall discuss important mid-year tax and financial planning topics.  Another very important area to consider is your Life Care Plan.

2011 Mid-Year Income Tax Plan

Federal Income Tax Rates.  The same 6 federal income tax rates that applied in 2010 will continue to apply through 2012.  So, depending on your taxable income, you’ll fall somewhere between the 10% and 35% bracket.   

Long-Term Capital Gains & Qualifying Dividends.  Long-term capital gains and qualifying dividends will continue to be taxed at a minimum rate of 15% through 2012; if your income (including any long-term capital gains and qualifying dividends) puts you in the 10% or 15% income tax bracket in 2011 and 2012, a special 0% rate will usually continue to apply.

Alternative Minimum Tax (AMT).  While regular income tax rates and the maximum rates that apply to long-term capital gains and qualifying dividends were extended through 2012, the latest AMT “fix” (increased AMT exemption amounts) is effective only through 2011.  So, if you may be subject to the AMT this year, you alreadt know what the relevant exemption amounts will be ($74,450 for married filing jointly, $48,450 for unmarried individuals, $37,225 for married filing separately); howeve, the AMT for 2012 is unclear.  There will probably be another AMT fix later in the year, but for now, AMT exemption amounts will show sharp decreases in 2012, significantly increasing the number of taxpayers caught in this parallel tax system.

Life Care Plan  

Life-Care Planning is a new area of law that helps families respond to the challenges of long life, illness and disability.  A life care plan includes the following:

  • Legal care, wills, trusts, powers of attorney and advanced directives; Medicaid planning; guardianships; and protection of the elder's right to safe and effective care.
  • Care coordination, including locating in-home care, nursing home care, family education and decision-making support - for the rest of your loved one's life.

Learn more about the benefits and our recommendations for the best way to approach your life-care plan.  It is critically important for seniors and their families to begin talking about a life-care plan because circumstances in life can change quickly, and if there are no plans in place, a stroke, dementia or other life-changing situation could occur suddenly, robbing you of your ability to make end-of-life financial and estate planning decisions.  A properly executed life care plan preserves the wishes of the planner and gives his/her family peace of mind, knowing those provisions will have already been secured.  Obviously, this kind of forward thinking goes hand in hand with conducting a mid-year financial and tax review.

Client Workshop for Life-Care Planning

On July 26 at 2PM at The Wellesley College Club we are inviting our clients and their guests to learn more about life-care planning from three guest speakers on topics including:  aging at home, assisted living options and financial considerations for retirees.

Where To Begin?

A good way to start your mid-year planning is to identify personal circumstances that may have changed:  marriage, divorce, births, deaths, retirement, career change, changes in income or anticipated changes in income and expenses, including medical expenses, investment performance, etc.

Improved Tax Planning

A mid-year check up on your tax liability will provide more tax-planning opportunites for you than rushing to plan for your taxes at year’s end.  Using last year’s tax return, you can make adjustments to your income and deductions for this year.  By then it's too late.  If you owed taxes or received a refund last year, you might want to adjust your estimated tax payments or withholdings or your retirement plan distributions.  This is also an excellent time to make sure you’re saving necessary receipts and other documents now to avoid a scramble at the end of the year.  Consider the contributions you are currently making to your retirement plan.  Have you evaluated your required minimum distribution requirement?  If you have a traditional IRA, would now be the time to convert it or part of it to a Roth?

Life Planning for Financial Considerations

If you have already retired, will your current plan provide you with enough income over the long term?  If you are concerned about running out of funds, you may consider a lifetime annuity which will pay you and your spouse for the rest of your life.  You may also want to evaluate whether a reverse mortgage makes sense for you.  What are your Social Security strategies?  Would you benefit from using the “file-and-suspend” option?  These are just some of the considerations to review as part of your life care plan.


Would now be a good time to consider rebalancing your portfolio?  Are your investments safe and productive?   Maybe now is the time to consider a review of your investments not only to make sure they are coordinated with your trust, but also to see if they fit your current needs and long-term health plan.  

What About Insurance?

Do you know the terms and the amounts of all your coverages:  house, life, auto, etc.?  Has your insurance kept up with your personal circumstances?  What about life insurance?  Long-term care insurance?  If you’re married, have you considered sharing a long-term policy instead of purchasing two individual ones?

As you can see, there are so many different areas that you can review and improve if you really undertake a review of your “financial and tax situation.”  Certainly leaving all this work to the end of the year is risky, particularly with so many things changing these days and so many different strategies and programs potentially available to you that could significantly improve your financial and/or tax picture.

For additional information and education about your tax, financial and life care plan options, call us at 781-237-2815, or attend a Trust, Estate and Asset Protection workshop by calling 800-964-4295 (24/7) or registering online (www.DSullivan.com).  We are hosting educational workshops at 10AM and 2PM on the following dates:

            Thursday, August 18

            Thursday, September 15

            Thursday, September 29

To learn more about tax planning, retirement strategies and estate planning, visit our website to watch Dennis Sullivan discuss these topics on the national talk show, “Leading Experts.”  


Tags: life-care plan, Retirement, Financial Planning, taxes

Will Medicare and Social Security Be There When YOU Need Them?

Posted by Dennis Sullivan & Associates on Jul 8, 2011 1:18:00 PM

Approximately 55 million retirees, the disabled, and children who have lost parents receive Social Security benefits. More than 46 million Americans are covered by Medicare. As the number of new Medicare and Social Security beneficiaries rises sharply with the upcoming wave of retiring Baby Boomers, can these programs continue to be viable?  Experts predict that Medicare will be exhausted by 2024 and Social Security will be bankrupt in 2036.

"The financial shortfalls confronting both Social Security and Medicare are substantial and -- absent legislation to correct them -- quite certain," wrote Charles P. Blahous III and Robert D. Reischauer, two trustees of Social Security and Medicare.   "Elected officials will best serve the interests of the public if financial corrections are enacted at the earliest practicable time."  Solutions that are undertaken early can be more of a gradual cure as opposed to last-minute, painful remedies like high tax increases and deep benefit cuts.

What’s Happened?

The sluggish economy is hurting Medicare and Social Security because fewer people are working and contributing payroll taxes that fund these programs.  Medicare also suffers the high cost medical care.  In addition, people are living longer and having costly procedures like bypass surgeries and hip replacements later in life.

What Does Medicare Cover?

Medicare is our countrywide health insurance program for people 65 or older and is financed by payroll taxes paid by workers and employers.  It is also partially funded by monthly premiums deducted from Social Security checks.  Medicare assists with the cost of health care but does not cover all medical expenses or most long-term care. The program has 4 parts:

  • Hospital Insurance:  for inpatient care, some in-home care and hospice care;
  • Medical Insurance:  for doctors' services and other miscellaneous medical services and supplies not covered by hospital insurance;
  • Medicare Advantage:  These plans are available in many areas so that people with Medicare Parts A and B can choose to receive all their health care services through one of the provider organizations under Part C.
  • Prescription Drug Coverage:  for doctor prescribed medications.

What Is The Government’s Response?

American seniors have worked hard, contributing to Medicare and Social Security for decades.  With the looming U.S. deficit at issue, however, those benefits are now at risk because Congress is considering dangerous cuts to Medicare and Social Security.  There are many efforts in place to fight for cuts to be made to wasteful government spending instead of hurting these valuable programs.

According to reports, the Social Security benefits for disabled Americans and their dependents would be the first to dry up with funding scheduled to run out in 2018.  The part of the fund that pays retirees, however, has enough money to stay solvent until 2036.

If nothing is done to remedy this before then, benefits will have to be cut by 23 percent or the Social Security payroll tax increased to16 percent or some combination of the two.   


For future planning, the best advice for maximizing Social Security benefits is to continue to work as long as possible and to delay retirement to age 70, if possible.  It is also a good idea to have some long-term care insurance - just in case.

Along with this, understanding strategies that married couples should use is key.  Many people benefit from claiming later and too many claim early – not usually a good idea.  In some instances, the lower-earning spouse should claim as early as possible and the higher-earning spouse as late as possible.

To get an idea of your monthly Social Security benefit, login to the Social Security website. (Visit the Social Security Administration’s benefit calculators website.)  Also, read The National Academy of Social Insurance’s report, ‘When To Take Social Security: Questions to Consider.’ (Read the report from the National Academy of Social Insurance here.)

For Medicare to remain viable for the next 75 years payroll taxes would have to be increased by 24 percent or current benefit payments cut by 17 percent.  The longer the US waits to address the pending shortages in Medicare and Social Security, the more painful it will be.  Delaying good fiscal planning for Medicare’s future now may mean cuts for current beneficiaries rather than diminishing them for people who enter the program in the future.

This could mean that by age 65 or older the average individual could need $300,000 set aside for medical expenses and $300,000 for long-term care if you do not buy a long-term care insurance policy. 

The bottom line here is simple.  Social Security and Medicare will probably be around for many years to come; however, these programs should start to be viewed as supplements rather than primary sources of retirement income and health insurance. 

To learn more about your options, call us at 781-237-2815 or to attend an upcoming Trust, Estate & Asset Protection workshop, call 800-964-4295 or register online .

For more information on how you can plan ahead to maximize your retirement earnings and protect your assets, visit our website to download our free guide on “The 7 Biggest Mistakes in Retirement & Estate Planning.” 



Tags: Nursing Home Costs, long term care, Medicare, in-home care, Retirement, social security

What is "Life-Care Planning" and Does It Apply To Me?

Posted by Dennis Sullivan & Associates on Jun 24, 2011 4:08:00 PM

Life-Care Planning is a new area of elder law that helps families respond to the challenges presented by long life, illness and disability.  Life-care planning is about being an advocate for your loved one in every long-term care setting and assisting the family with those overwhelming decisions.

A Life-Care Plan includes the following:

  • Legal Care, estate planning, including wills, trusts, powers of attorney and advanced directives; Medicaid planning; guardianships; and protection of the elder's right to safe and effective care for which he/she is entitled.

  • Care Coordination, which includes locating in-home help and services, coordinating home health care and long-term care, family education and decision-making support - for the rest of your loved-one's life.

Life-Care Planning in Practice

Picture you and your wife and your close friends Kathy and Joe - all in your late 60s.  You get together often and enjoy talking about wintering in Florida, lots of golf and enjoying your retirement years.

One day, Joe suffers a serious stroke which leaves him partially paralyzed.  He will need full-time care.  Joe's wife, Kathy, however, cannot provide the full-time care he needs on her own so she seeks the help of their daughter.  The daughter is very willing to help, but she has a family of her own and is subject to her family's needs as well.  Therefore, Kathy will have to get some in-home care for Joe to supplement what she and her daughter can do.

The end result here is that Kathy and Joe’s lifestyle has completely and unexpectedly changed.  Their financial stability is now also at risk with the high cost of in-home care, which is quickly depleting their savings and putting their other assets in jeopardy.  If this continues, Kathy faces the real possibility of becoming an impoverished spouse if she lives long into her senior years. 

Time to Assess Your Situation

This is truly a heartbreaking situation, but not an uncommon one.  Fearing the same thing could someday happen to you, you and your wife decide to consult with your estate planning and financial team. 

You have no children, so you cannot count on them to help in case of a debilitating illness or injury.  Imagine your legal and financial team reviewed your current assets and retirement plan.  You have paid off your house, faithfully saved money in your 401(k) accounts, and have a healthy IRA.  You even have a cottage on Cape Cod.  A devastating illness, however, is no match for the typical American’s retirement savings. 

The current cost of a nursing home is $12,000 per month, $144,000 per year and $720,000 for a 5-year stay in today’s dollars.  In-home care costs are considerably less, at about half the cost of a nursing home stay.  At these rates, a long-term care situation, even for one person, can easily wipe out a couple’s savings.  In addition, a lien could be placed on your homes, preventing you and/or your spouse from selling them or obtaining a reverse mortgage or home equity loan.  (Watch Dennis Sullivan explain how you can take control of your legacy, not leaving your estate to nursing homes or the IRS.)

Moral of the Story:  Plan Ahead - Consider all the options.

After considering your age and the fact that you were both in good health, your estate-planning attorney might recommend looking into long-term care insurance.  To reduce your premiums you might decide to buy a “shared” care plan.  With a shared care plan, a couple can buy a plan for a set amount to be shared.  So instead of buying two $300,000 plans, a couple may choose to buy one $500,000 plan to share, which can save some premiums.  The benefits of such a plan include:

  • The confidence knowing you could handle an unexpected life event if it occurred.

  • The knowledge that if one of you became ill or injured, you would have the resources to be cared for in your own home and not be forced to move into institutionalized care.

  • Asset protection insurance – your retirement savings would not be jeopardized. (Caution:  You must still protect your assets from financial exposure in excess of policy limits.)

Life can change in the blink of an eye, and although you can’t be prepared for everything, you can prepare for long-term care expenses as long as you coordinate your planning to cover risks and provide you with the flexibility and lifestyle that suit your comfort level and budget.

Our Recommendations

In our experience of more than 25 years helping people and their families in this area, it is the combination of the legal and financial protection, which is best.  In-home care insurance pays for your family member to stay at home and also provides a care coordinator to make sure that he/she is taken care of and the level of care is maintained. 

In addition to insurance, it is also very important to have all their assets protected with a protective trust in case an extended nursing-home stay is unavoidable. With the right legal protection of your home and life-savings, your spouse and your legacy will be safe.  You will never become a victim of nursing home poverty.  You will have done all you could to protect yourself, your spouse and your legacy.  If this makes sense to you, please let us know; we will help you get started.  To learn more about protecting your home, spouse, family and life savings, attend a free, educational Trust, Estate & Asset Protection Workshop . Register online or call 800-964-4295 (24/7) for upcoming dates.

Tags: long term care, life-care plan, in-home care, Protective Trusts, Retirement