NYSBA 2015 Annual Meeting Planning Ahead for Retirement: Putting Your Personal, Financial and Office Affairs in Order Daniel A. Timins, Esq., CFP® 450 7th Avenue, Suite 1500 New York, NY 10123 (212) 683-3560 www.timinslaw.com dan@timinslaw.com

Saving for Retirement & Preparing for Aging I. Financial Affairs Saving for Retirement & Preparing for Aging

Types of Retirement Plans Qualified Plans Defined Benefits Plans (Future Benefit Known) Traditional Pensions 412(i) Plans Cash Balance Plan Defined Contribution Plans (Current Funding Known) Money Purchase Plans Tandem Plans Target Benefit Plans Profit Sharing Plans (Employee Funded; Employer Funding is Optional) 401(k) Plans Savings & Thrift Plans Stock Option Plans Stock Purchase Plans 403(b) Plans (Employer $ is Qualified) Non-Qualified Plans Traditional IRAs SEP IRAs Simple IRAs Pension Plans (Employer Funded)

Defined Benefit Plans General Concept: Positive: Negatives: We DO know how much we will receive one day We do NOT know how much we need to contribute until the year of contribution Positive: Can contribute a large amount of pre-tax dollars Lump sum transfers to IRAs permissible Negatives: Annual actuarial costs and initial set up costs Payment amounts are required / inflexible Most Appropriate For: Aging practitioners at the height of their earning years Stability of annual income is helpful for long-term planning

Defined Contribution Plans General Concept: We do NOT know how much we will have in the future We DO know how much we have contributed any given year Positive: Minimal set up and recurring costs Not “locked in” to any contribution amounts Negatives: Significantly smaller contribution levels and tax savings than Defined Benefit plans Most Appropriate For: Any person willing to save for retirement

Contribution Limits for 2015 Defined Benefit Plans: $210,000 Based on plan design, income, actuarial figures, etc. 401(k) / 403(b): $18,000 “Catch Up” for those 50 and older: $6,000 SEP IRA / Solo 401(k): $53,000 Amount is based on a percent of actual income SIMPLE IRA: $12,500 Very inexpensive plan to start and maintain

IRA Limits for 2015 Traditional IRA: $5,500 “Catch Up” for those 50 and older: $6,500  Deductible now, tax deferred growth; tax at time of withdrawal IRA tax deduction phase out – ONLY if you are not covered by another plan: Single: Full amount can be deducted Couple where spouse has no plan at work: Full amount Couple: $183,000 - $193,000

Roth IRA Limits for 2015 Roth IRAs: $5,500 “Catch Up” for those 50 and older: $6,500  Taxable Now, tax deferred growth; no tax at time of withdrawal Roth contribution availability phase out: Individual: $116,000 - $131,000 Couple: $183,000 - $193,000

Defined Contribution Contributions Can be made in one lump sum or on an on- going basis Can be made as late as April 15th of the year following the actual deduction Example: Can fund 2014 contribution as late as April 15, 2015 Can be made from Required Minimum Distributions (if you are over 70 ½ and still working)

Comment on Roth Conversions You can convert pre-tax dollars to Roth IRAs You pay taxes on all withdrawal amount There are many arguments against converting You are taking a certainty (paying taxes now) in the face of several uncertainties How much will taxes be in the future? Will RMD treatment change in the future? Will you live long enough to see substantial RMD withdrawal amounts?

Social Security

Social Security

So…How Much Do I Need? What does Dan say? Varies during different phases of retirement Ages 70 – 80: 100%-140% of working discretionary income Ages 80 – 85: 70% - 80% Ages 85+: Marked decrease

Long Term Care Insurance ACTIVITIES OF DAILY LIVING (“ADLs”) Transferring (Ie. Walking) Bathing Dressing Eating Continence Toileting

LTC Insurance to the Rescue! Long Term Care Insurance = Private Pay Pays for Home Care: a certified caregiver comes to your home to assist you with your ADLs OR Pays for Nursing Home Care A need for more constant care Trained staff on-site (such as nurses)

LTC is NOT… Medicare Medicaid Health Insurance Disability Insurance Life Insurance

LTC: How the Benefit Works Example: $250 per day for 5 years $250 x 365 days x 5 years = $456,250 $456,250 is usually your guaranteed amount This is your “Insurance Pool” If you use it slower = lasts longer If you use it faster = lasts less time

LTC Problems Very few lapsed policies! Lapsed policies were built into premium prices Insurance companies losing money!!! Insurance Company “Fixes” – for new AND existing policies: Premiums raised Coverage Terms decreased

II. Personal Affairs Living Documents Post-Mortem Documents Power of Attorney Health Care Proxy Post-Mortem Documents Last Will and Testament Beneficiary Designation Forms Trusts (optional)

Power of Attorney Designate a person(s) to manage your financial affairs. Business partner  business finances Family member  personal finances States specific areas of your finances you are giving control over (can be all areas). Can allow “Gifting” to others Beware. This is a blank check. The person you designate could take all your money. They could go to jail, but the money may have disappeared before they are caught.

Health Care Proxy A document regarding health care decisions Names an “Agent” Gives authority to make health decisions Grants access to medical records States Organ Donation desires Places limitations on treatment

Living Will States your desires when: 1. You are in a terminal condition; or 2. You are permanently unconscious; or 3. You are conscious but have irreversible brain damage and will never regain the ability to make decisions and express your wishes. These conditions are sometimes referred to as a “vegetative state."

Methods to Transfer Your Property “Operation of Law” Transfers “Testamentary Substitutes” Probate / Administration Anything with a “Beneficiary Designation” Because we know who it goes to at death Jointly Owned Property Some Business Agreements Retirement Plans Life Insurance Transfer on Death [“TOD”] accounts Trusts This is what transfers through your WILL Because we don’t automatically know who it goes to This includes all property not listed under “Operation of Law” (I.e. everything else) 2 Legal Procedures: If there is a valid Will = “Probate” If NO Will = “Administration”

Non-Testamentary Transfers “Testamentary Substitutes” This property does not require a Last Will and “Testament” for it to be transferred (so we call it “Non-Testamentary”) Your Business Partnership (sometimes) Joint Property Life Insurance Retirement Plans Transfer on Death [“TOD”] accounts Trusts

So When Do I “Need” a Will or Trust? Estate tax planning (if you have substantial assets) Medicaid Planning (if you are worried about age-related illnesses) Beneficiaries are spendthrifts / substance issues Second marriages with children from another union (sometimes) Substantial assets in one person’s name that are not Testamentary Substitutes

Trusts vs. Wills Wills Trusts Positives Typically cost less to draft You should have one anyway No Probate costs for assets transferred by Trust(s) Private document Fast distribution of funds / Continuity of control May provide tax savings / government program access Negatives Eventual Probate Costs All information is public Longer time to access and distribute funds You may need a “Testamentary Trust” anyway More legal fees up front Time / effort required to transfer assets into Trust

III. Office Affairs Preparing Your Practice for Incapacity, Transfer or Death

Determine Your Successor / Value Your Practice Identify a Protégé Same practice area(s) Same values / morals Enable their success! Introductions, referrals, office equipment, client files, etc. Valuation: How much? Your client list and contacts have a value Transactional practices with recurring clientele may have a greater value

Power of Attorney (Work) Consider having a POA for your office affairs while working A protégé or trusted colleague is more appropriate than a spouse, or an associate / employee Include appropriate terms in the Modifications Section of the Statutory POA Access to office, client files, client contact information Do NOT include gifting abilities under Statutory Gift Rider of POA Agent can still gift to you; from there your personal POA should handle gifting

Power of Attorney (Continued) Have “The Talk” with your Attorney-in-Fact as to your desires The POA requires that the Attorney-in-Fact honor the instructions and desires of the Principal

Power of Attorney (Continued) Technology Consultant Have your business passwords on file with your technology consultant Provide written instructions as to who your agent is and to what they should have access Provide a list of other pertinent contacts technology consultant, banker, insurance agent, book keeper, accountant Provide location of client files

Your Passing and Your Practice Your responsibility over client files continues after your passing Your Executor / Administrator will have to handle your firm’s affairs (if it is not transferred prior to your passing) Your Executor needs to make an application to the Court to access your Attorney Escrow Account