5 Steps to Prevent Your Debt From Haunting Your HeirsIf you have debt, don’t assume it will disappear on it’s own. Chances are, it will eat into the assets you may be planning to leave your heirs and may even wipe out your estate.

Estate and financial planners say it is an increasingly common scenario, largely because older Americans are taking on and carrying more debt. In fact, middle-income Americans age 50 and older are now carrying more credit card debt on average than younger people, according to a report released in January by Demos, a New York-based policy research organization. According to the report, older households carried an av-erage credit card balance of $8,278 in 2012, compared with $6,258 for those under 50. That does not include underwater mortgages, home equity lines, auto loans, and other liabilities they may be carrying.

If your debts outweigh your assets when you die—in other words, if you are insolvent—the good news is that creditors cannot go after your survivors for the money, as long as the debt was yours alone. Generally speaking, though, your survivors will not inherit your debt.

But if you do have enough in your estate to cover your liabilities, you can bet that creditors will be knocking at the door. The law requires your executor to sell your assets and pay off any debts before making distributions to your heirs. But some assets are protected from credi-tors, either because of specific laws that shield them or because they have direct beneficiaries and don’t go through probate. Assets that do not go through probate are harder for creditors to access.

As part of an overall estate planning strategy, you can take steps to protect your assets and maximize the wealth you pass on. If you al-ready have debt, you have to be especially careful because federal law prohibits the transferring of assets to protected accounts specifically to

Volume 5, Issue 4

Also in this issue...

On The Rise: Seniors Carrying Student Loan Debt

PLUSTips for Seniors Dealing withStudent Loan Debt

King Ranch Chicken Mac & Cheese

Logic Riddles

Power of Attorney: Myths & Facts

Pathways to Independent Living is a quarterly newsletter brought to you by Senior Helpers that is focused on bringing relevant and engaging information to seniors looking to age independently in place.

avoid creditors. Your best bet is to work with a qualified estate planner, because laws are com-plicated and vary by state. But here are a few steps to consider:

Be honest with your heirsToo often, heirs are in the dark about loved ones’ debts and get a rude awakening when they die. “We’ve seen situations where the kids were living above their means waiting for a parent to die to bail them out only to find that it won’t happen because the parents have debt,” said Martin Shenkman, an estate planner in Paramus, N.J.

The solution, he and other experts say, is to share your complete financial picture with your succes-sors, and update it often. You may want to give them a list of your assets and liabilities, as well as the names of any beneficiaries. Given your specific family dynamics, you can choose to reveal more—or less—information to your heirs as you deem appropriate.

Buy enough life insuranceWhile the main reason to buy life insurance is income protection, it can also help heirs pay off a debt on inherited items, such as a home or car, that they want to keep. Typically, a loan collater-alized by an asset stays with the asset, meaning someone who inherits your car or house will likely get the mortgage or auto loan as well. Life in-surance is almost always exempt from creditors, although the exemption amount varies by state.

Name a person, not your estate, as beneficiaryLike life insurance, 401(k) accounts and the family home are shielded from creditors in some states. Other assets, including IRAs and payable-on-death bank and brokerage accounts, can be difficult for creditors to reach because they have direct benefi-ciaries and do not go through probate.

The key to protecting those types of direct-ben-eficiary assets from creditors, experts say, is to specifically name an individual as the beneficiary,

not your estate. “Anything you can keep out of probate is going to be harder for unsecured creditors to grab. But if you name your estate the beneficiary, that asset becomes part of the pro-bate estate,” says Shenkman.

Consider loan protection insuranceIf life insurance is not an option for you, consider loan protection insurance or payment protection insurance, said Howard Dvorkin, founder of Con-solidated Credit Counseling in Fort Lauderdale, Fla., and author of “Credit Hell: How to Dig Out of Debt.”

These declining-term policies pay off specific loans—your auto loan, credit card balance or your mortgage—if you die or become disabled and unable to pay. Because they are declining-term policies, their value decreases as you pay off the loan. They are also more expensive than tradition-al life insurance.

Loan protection plans that pay off your mort-gage, also called mortgage life insurance, are often offered by your lender when you get a mortgage and can be a sensible choice for some people, said John H. Langbein, a professor of trust law at Yale Law School. He notes that you can shop around by asking other insurers about their declining-term policies. Just make sure you use an insurer that is reputable.

Start paying down your debtThe biggest gift you can give your heirs, of course, is to take care of your debt now, while you are alive. Figure out how much total debt you have, and create a plan to cut your spending and start paying it down. Then cut back on major purchases and stop using plastic. If necessary, you can get help from a nonprofit credit counseling agency.

Source: reprinted from creditcards.com. Materials may be edited for content and length.

Can You Solve These Riddles?

Which creature walks on four legs in the morning, two in the afternoon, and three legs in the evening?

What kind of room has no doors or windows?

Which word in the dictionary is spelled incorrectly?

Answers on page 4

Many people assume student loans are problems only young adults have, but seniors are now carrying a hefty debt load. Each year, more seniors are carrying their college debt into retirement. Student loan debt is likely to become a bigger problem as baby boomers grow older.

According to a report released by the Government Accountability Office (GAO) in 2013, “the total outstanding debt load held by seniors grew to $18.2 billion, up from $2.8 billion in 2005.” In addition, the share of households headed by people “between the ages of 65 and 74 who have student loan debt grew 3% from 2004 to 4%.”

The GAO report states, “about 80% of college debt carried into retirement came from loans seniors took out for their

own education.” The remaining “20% of debt was for loans people took out for their children or other dependents.”

Student loan debt held by seniors can be especially unnerving because these loans stay with you for life, even if you file for bankruptcy.

Consequences of defaulting on student loans include withholding of state and federal tax refunds, garnishment of wages, seizure of savings and checking accounts, and damage to your credit report.

Every day, more seniors are seeing a portion of their Social Security benefits garnished to pay back the debt. Jonnelle Marte, contributor to the Washington Post, states that “a whopping 155,000 people in 2013 whose benefits were cut to pay for student loan debt grew from 31,000 in 2002.”

According to Marte, “among those age 65 and older, the number grew by 500 percent over that time period.”

For many seniors, the efforts to collect on student loan debt can cut into their primary source of income. According to the Social Security Administration, about three-fourths of single elderly people receiving Social Security

benefits get more than half of their income from Social Security.

Tips for seniors carrying student loan debt can be found on page 4.

Excerpts from washingtonpost.com

King Ranch Chicken Mac & Cheese

1. Preheat oven to 350°. Prepare pasta according to package directions.

2. Melt butter in a large Dutch oven over medium-high heat. Add onion and bell pepper, and sauté 5 minutes or until tender. Stir in tomatoes and green chilies and prepared cheese product; cook, stirring consistently, 2 minutes or until cheese melts. Stir in chicken, next 4 ingredients, and hot cooked pasta until blended. Spoon mixture into a lightly greased 10-inch cast-iron skillet or 11x7 inch baking dish; sprinkle with shredded Cheddar cheese.

3. Bake at 350° for 25 - 30 minutes or until bubbly.

1/2 package cellentani pasta

2 tablespoons butter

1 medium onion, diced

1 green bell pepper, diced

1 (10-oz.) can diced tomatoes and green chilies

1 (8-oz.) package pasteurized prepared cheese product

3 cups chopped, cooked chickenRecipe from www.myrecipes.com

On The Rise: Seniors Carrying Student Loan Debt

1 (10 3/4-oz.) can cream of chicken soup

1/2 cup sour cream

1 teaspoon chili powder

1/2 teaspoon ground cumin

1/2 cups (6 oz.) shredded Cheddar cheese

4 Tips For Seniors With Student Loan Debt

significant legal consequences. If an agent takes advantage of you, they can be subject to civil lawsuits and penalties, as well as criminal sanctions.

I made my power of attorney years ago, so I don’t need to worry about it anymore. As with any estate planning device, it is important to review your power of attorney on a regular basis. If the power is active, you might want to renew or rewrite the power every six months to one year.

source: http://www.kulaslaw.com

Power of

Attorney:

Myths and

Facts

1. Know the true cost of stu-dent debt. Many seniorstook out loans to help theirdependents afford college,but 80 percent of the debtwas incurred for their owneducation. The recession sentdroves of older Americansback to school to becomemore competitive in theworkforce, but many couldnot pay off their debt beforeretirement. Seniors shouldseek financial guidance tounderstand the true impactof student debt—and to gethelp paying it back.

2. If you want to help, givecash. Seniors should under-

stand that cosigning loans for children or grandchildren may lead to full responsi-bility. It is best to gift cash. Seniors who do not have the money to spare simply are not in a position to help with the burden of college expenses.

3. Understand the ins andouts. The government canreduce monthly Social Se-curity down to $750 to payoff student debts, creatingdifficulty for seniors who relyon their benefits to pay forbasic living expenses. In ad-dition, student loans cannottypically be discharged in

bankruptcy, limiting the op-tions for seniors struggling with debt.

4. Rehabilitate your loans. It isnever too late to rehabilitatestudent loans, even if theyare in default. Income BasedRepayment is one optionthat provides for reasonablestudent load payments basedon the debtor’s income.

Reprinted from YahooFinance.com, http://finance.yahoo.com/news/charge-america-educates-seniors-repaying-151500071.html

I don’t need a power of attorney because I’m young/healthy/married. A power of attorney is one of the best tools you can have to guard against future disasters or emergencies. If you do not have these documents and something happens to you, there is no guarantee that those who end up making decisions on your behalf will do what you want them to do.

I shouldn’t make a power of attor-ney because anyone I appoint as an agent might take advantage of me. Agents have a legal duty to act in your best interest, or they can face

Answers to Riddles

1.Man. He crawls on all fours as a baby,then walks on two feet as an adult, and then walks with a cane as an old man. 2.A mushroom 3. Incorrectly