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Patent Pending Retirement Trust for Baby Boomers’ Children

William E. Hesch Law Firm, LLC

3047 Madison Road, Suite 205

Cincinnati, OH 45209

(513) 731-6601 Phone

(513) 731-4173 Fax


Patent Pending Retirement Trust for Baby Boomers’ Children

The Patent Pending Retirement Trust is an innovative trust idea that William E. Hesch, Esq., CPA, PFS created when working on an estate plan for his millennial children.  Bill was worried about his children planning for their retirement, and was trying to think of creative ways in which he could ensure that the two of them would have a sufficient amount of money to live off of when they reached retirement age.  Using his expertise in estate planning law, wills and trust law, asset protection planning and tax planning from his years of experience as an attorney, CPA, and financial planner (PFS) Bill created a Retirement Trust for his children.  In its simplest form the Retirement Trust is a trust meant to be a retirement plan for the Grantor’s children who do not expect Social Security to be, much of any help to them in thirty (30) years.

After using the trust for his estate plan, he began sharing the idea with clients over the past three years, to gauge whether or not there was a need in the estate planning market for such an instrument.  Many clients loved the concept and have in fact requested a Retirement Trust for their own estate plan.  Due to the positive reaction from his clients, Bill filed for a patent in August, 2018 and the Retirement Trust became “patent pending” in August, 2019.

Why use a Retirement Trust?

It is well known that the younger generations are not saving enough for their retirement.  Millennials are not saving for retirement in their 401(K)s and IRAs, and social security may not provide much retirement income for the generations that follow the baby boomers.  The main purpose for the Retirement Trust is to provide financial security for Grantor’s children in their retirement years.  A Retirement Trust allows the Grantor (or Grantors) to hold assets in a trust for the benefit of their children until their children reach an age specified by said Grantor, typically sixty-two (62) years of age. Upon reaching age sixty-two (62), the children begin receiving monthly distributions of retirement income, as provided for in the trust document.  There are a number of features the Grantor had customized in the instrument for his or her specific situation.

Who are the clients using Retirement Trusts?

This trust is typically used by baby boomer clients whose children are already old enough to be out of college and in the work force.  These clients want the benefits of using a revocable trust in their estate plans but are concerned with their children’s (or other beneficiaries’) financial security when they retire.  They have these concerns for many reasons, including: (1) their children’s past financial decision making; (2) have children who are entrepreneurs and are worried those children won’t have a nest egg for their retirement; (3) their children have potential creditor problems and don’t want them inheriting trust assets outright in a lump sum distribution; or (4) they believe social security benefits will not be there for their children.  It is a fact that seventy percent (70%) of lottery winners end up bankrupt in just a few years after receiving a large financial windfall.  It is not hard to believe that many children receiving a substantial windfall all at once from their parent, in their thirties or forties, may suffer the same fate.

How does the Retirement Trust work?

The Retirement Trust is a revocable trust that becomes irrevocable upon the death of the Grantor or both Grantors.  Upon the death of the Grantor, the trust is divided into sub trusts for each child.  Each child has the right to certain monthly distributions of their sub trust until that child reaches retirement age, typically age sixty-two (62).

Required distributions before reaching age sixty-two (62).

The Grantor has a choice of the method in which the required distributions before reaching the age of retirement are distributed, but it is commonly one or more of the following options: (1) a fixed dollar amount of the trust income and principal each year, adjusted for inflation annually (i.e. $20k); (2) a fixed percentage of the trust principal each year (i.e. 4% which would allow the trust nest egg to grow, while supplementing beneficiary’s income.); and (3) the Grantor may attach a work requirement to the beneficiary’s distributions before reaching the designated retirement age.  If a child becomes disabled, monthly payments commence for early retirement.

Distributions upon reaching the age of retirement.

Once the child reaches age sixty-two (62), the balance of assets remaining in that child’s sub trust are totaled and that child is entitled to a monthly annuity payment using the average monthly payment amounts that would be payed from Northwestern Mutual and New York Life annuities, payable for the remainder of that child’s life.  Typically, the trust will outline that payments shall be paid monthly beginning on the last day of the month in which the child turns sixty-two (62).

Northwestern Mutual and New York Life do not need to be the insurance companies identified in this section of the Trust.  Any insurance company’s annuities or actuarial tables or the IRS life expectancy tables can be used to compute a monthly benefit to be payable for that child’s life.  To clarify, an annuity is not actually purchased from one of these insurance companies.  The Trustee simply obtains a quote from each insurance company and pays from the trust the equivalent of the average monthly annuity payment that would have been paid from those insurance companies had an annuity actually been purchased.

For more information about this creative, innovative, Patent Pending Retirement Trust, call Bill Hesch to set up a free 30-minute initial consultation at 513-509-7829.

(Legal Disclaimer:  William E. Hesch submits this blog to provide general information about the firm and its services.  Information in this blog is not intended as legal advice, and any person receiving information on this page should not act on it without consulting professional legal counsel.  While at times Bill Hesch may render an opinion, Bill Hesch does not offer legal advice through this blog.  Bill Hesch does not enter into an attorney-client relationship with any online reader via online contact.)

Hesch Law / CPAs Office Coronavirus Procedures

Our firm remains open and available to serve you while maintaining our top priority of keeping our employees and clients SAFE.  I am working daily at the office from 9am to 5pm and office staff are working at home as much as possible.  Meetings with staff are encouraged to be by phone conference or Zoom if possible.  Otherwise, in person meetings in the office are kept to a minimum and safe distancing is strictly observed.

Tax information can be mailed or emailed to us or can be dropped off on our 2nd floor stairwell by appointment.

Any documents that need to be executed and witnessed or dropped off are done by appointment only.  Please schedule this with Bill Hesch at 513-509-7829 or office staff at 513-731-6601 or 513-731-6612.  Arrangements can be made to schedule a drop off on the second floor stairwell to our front door entrance on Madison Road.

In regard to the sanitation of our office, the office is deep cleaned every week.  We disinfect all door handles, bath sink handles and light switches every day.

When the staff is meeting in each other’s work space or meeting with clients, both employees and clients shall wear masks.  Also, when staff enter into the common areas in our office, they shall be wearing their masks.

Hand sanitizer and masks have been provided to all staff and will be made available to any visitor in the office.

Thank you and prayers for everyone’s safety!!

Bill Hesch

William E. Hesch Law Firm, LLC
William E. Hesch CPAs, LLC
3047 Madison Road, Suite 201/205
Cincinnati, OH 45209
(513) 731-6601 Phone
(513) 731-6612 Phone
(513) 731-6613 Fax

How to Deduct Assisted Living and Nursing Home Bills

Watch your wallet: the median cost in 2018 for an assisted living facility was $48,000 and over $100,000 for nursing home care.

If you could deduct these expenses, you’d substantially reduce your income tax liability—possibility down to $0—and dramatically reduce your financial burden from these costs.

As you might expect, the rules are complicated as to when you can deduct these expenses. But I’m going to give you some tips to help you understand the rules.

Medical Expenses in General

On your IRS Form 1040, you can deduct expenses paid for the medical care of yourself, your spouse, and your dependents, but only to the extent the total expenses exceed 7.5 percent of your adjusted gross income.  In December 2019, Congress retroactively reduced the 10% adjusted gross income limitation to 7.5% in 2018.  Therefore, taxpayers can file amended personal income tax returns for 2018 and 2019 as a result of that retroactive tax law change.

Medical care includes qualified long-term care services.

Assisted living and nursing home expenses can be qualified long-term care expenses depending on the health status of the person living in the facility.

If you operate a business, your business could establish a medical plan strategy that could make the medical expenses business deductions for your business.

Qualified Long-Term Care Services

The term “qualified long-term care services” means necessary diagnostic,preventive, therapeutic, curing, treating, mitigating, and rehabilitative services, and maintenance

or personal care services, which

  • are required by a chronically ill individual, and
  • are provided pursuant to a plan of care prescribed by a licensed health care practitioner.

Chronically Ill Individual

A chronically ill individual is someone certified within the previous 12 months by a licensed health care practitioner as

  1. being unable to perform, without substantial assistance from another individual, at least two activities of daily living for a period of at least 90 days due to a loss of functional capacity;
  2. having a similar level of disability (as determined under IRS regulations prescribed in consultation with the Department of Health and Human Services) to the level of disability described in the first test; or
  3. requiring substantial supervision to protect the individual from threats to health and safety due to severe cognitive impairment.

A licensed health care provider is a doctor, a registered professional nurse, a licensed social worker, or another individual who meets IRS requirements.

Activities of Daily Living Test

For someone to be a chronically ill individual, at least two of the following activities of daily living must require substantial assistance from another individual:

  • Eating
  • Toileting
  • Transferring
  • Bathing
  • Dressing
  • Continence

Substantial assistance is both hands-on assistance and standby assistance:

  • Hands-on assistance is the physical assistance of another person without which the individual would be unable to perform the activity of daily living.
  • Standby assistance is the presence of another person within arm’s reach of the individual that’s necessary to prevent, by physical intervention, injury to the individual while the individual is performing the activity of daily living.

Examples of standby assistance include being ready to

  • catch the individual if the individual falls while getting into or out of the bathtub or shower as part of bathing, or
  • remove food from the individual’s throat if the individual chokes while eating.

Cognitive Impairment Test

Severe cognitive impairment is a loss or deterioration in intellectual capacity that is comparable to, and includes, Alzheimer’s disease and similar forms of irreversible dementia, and measured by clinical evidence and standardized tests that reliably measure impairment in the individual’s short- or long-term memory; orientation as to people, places, or time; and deductive or abstract reasoning.

Substantial supervision is continual supervision (which may include cuing by verbal prompting, gestures, or other demonstrations) by another person that is necessary to protect the severely cognitively impaired individual from threats to his or her health or safety (such as may result from wandering).

You have much to consider if you face the medical issues above. I’m happy to help you understand if your medical expenses can qualify for the medical deductions and what this means taxwise.

William E Hesch

William E. Hesch Law Firm, LLC

William E. Hesch CPAs, LLC

3047 Madison Road, Suite 201

Cincinnati, Ohio  45209

Office:  513-731-6601

Direct:  513-509-7829



2018 Tax Reform for Meals and Entertainment

The 2018 Tax Reform made a lot of changes to the meals and entertainment deductions. Here’s a short list of what died on January 1, 2018, so you can get a good handle on what’s no longer deductible:

  • Entertainment and meals while entertaining included in the cost of the event are not deductible
  • Golf
  • Skiing
  • Tickets to football, baseball, basketball, soccer, etc. games
  • Disneyland

Meals during the course of entertainment will be deductible if purchased separately from the entertainment event.

Continue reading “2018 Tax Reform for Meals and Entertainment”

Estate Planning Lessons to Be Learned From the Passing of Aretha Franklin

Aretha Franklin, a.k.a. the Queen of Soul, died August 16, 2018. She influenced millions through her music and civic actions. She was a longtime resident of Michigan, where she lived until her death. Aretha Franklin left behind four adult sons, and unfortunately for them, she did not have a will or trust. Her estate has been widely estimated to be worth currently about $80 million, and under Michigan law, her four sons will divide the estate equally among themselves.

One of the biggest reasons a person, especially someone in a financial position like
Aretha, should have a trust is for the added privacy it provides. If a person has only a will or nothing at all in place, the estate would go through probate. One of the worst things about the probate process is that it is all public record, and available to anyone’s eyes. A trust would have ensured that the nature of her assets be kept private because it avoids probate, and not put on public display.
Continue reading “Estate Planning Lessons to Be Learned From the Passing of Aretha Franklin”

Tax-Saving Tips

New IRS 199A Regulations Benefit Out-of-Favor Service Businesses

If you operate an out-of-favor business (known in the law as a “specified service trade or business”) and your taxable income is more than $207,500 (single) or $415,000 (married, filing jointly), your Section 199A deduction is easy to compute. It’s zero.

This out-of-favor specified service trade or business group includes any trade or business

Continue reading “Tax-Saving Tips”

SPECIAL NEEDS TRUSTS: Pt. 3 – Pooled Trust Mistakes

Aside from the individually structured first and third party special needs trusts, a pooled SNT is a trust that is for multiple individuals with special needs. A pooled SNT is a trust that is established and managed by a non-profit organization. It is a trust that pools together all of the assets of the disabled individuals that have accounts through the trust, as well as assets acquired through outside donations, and makes distributions to the beneficiaries based on their individual shares of the trust’s assets. Pooled SNTs are a way to relieve family members of the job of being the trustee and allows professionals to handle the tedious responsibilities of being the trustee. Some important aspects that set apart pooled SNTs from first and third party SNTs are:

  • Pooled SNTs do not have any age limits;
  • The disabled person is able to be one of the grantors of the trust; and
  • Any excess funds at death are generally kept by the non-profit.

Continue reading “SPECIAL NEEDS TRUSTS: Pt. 3 – Pooled Trust Mistakes”

SPECIAL NEEDS TRUST MISTAKES: Pt. 2 – Third Party Trust Mistakes

A Third Party Special Needs Trust is created for the benefit of a disabled person, which ensures that the disabled person will have proper care. The Third Party SNT is funded with assets typically by family and friends of the disabled person. Unlike the First Party SNT, the property is never owned by the disabled person, and there is also no payback of Medicaid or any other government benefits. When properly planned, a Third Party SNT can provide greater flexibility than a First Party SNT, and can be a very useful mechanism for providing proper care for a person with special needs.

While every state has its own requirements for Special Needs Trusts, generally, Third Party SNTs are more flexible because there are no age requirements. They also do not have to be monitored by the Probate Court in the county of their residence, and may be either revocable or irrevocable. As long as there is careful planning and proper management, there is no repayment of any governmental funds, like Medicaid.

There are common mistakes that must be avoided to ensure that the Third Party SNT works properly and will not have adverse effects on the disabled person or trustee. One of the first mistakes is improperly transferring property into the trust that may disqualify government benefits or require the trust to payback the state funds. It is essential that the property in the trust is never owned by the disabled person, and he or she have no legal right to the property. Transferring property, including money, that can be traced back to the disabled person can be considered a “step-transfer,” and would result in Medicaid and other state funds to be repaid, which could cost thousands of dollars.

Continue reading “SPECIAL NEEDS TRUST MISTAKES: Pt. 2 – Third Party Trust Mistakes”

SPECIAL NEEDS TRUST MISTAKES: Pt. 1 – First Party Mistakes

A First Party Special Needs Trust is set up for the benefit of a person with special needs, and is funded with the disabled person’s own property. Different rules apply when a Third Party SNT that is set up by family members for the benefit of the disabled person. Typically, a First Party SNT is used in two common scenarios: the disabled person receives a lawsuit settlement for damages, or when the disabled person inherits money or property from family, who did not set up a Third Party SNT.

When a disabled person owns property outright, the person may face difficulty receiving government benefits. This is where a First Party SNT comes in; it allows the disabled person to have access to their property, while the trust retains ownership of it, which improves the disabled person’s ability to receive government funding. When formed properly, the First Party SNT is a useful vehicle for ensuring proper care for a person with special needs.

Continue reading “SPECIAL NEEDS TRUST MISTAKES: Pt. 1 – First Party Mistakes”

IRS Releases New Form W-4 for 2018

With the new tax law, how much will you owe the IRS when you file your 2018 tax return next April?

Now that most of our clients have their 2017 taxes filed, it is time to start taking action regarding 2018 taxes. The Tax Cuts and Jobs Act or TCJA has an impact on just about every area of tax one can think of in 2018. These changes include increasing the standard deduction, removing the personal exemption, and changing the tax rates and brackets. The impact of these changes will affect both employees and business owners. The first effect you or your employees might notice is that some employees’ take-home pay may have increased due to the adjustment in IRS withholding tables. These larger paychecks are wonderful, but employees should be cautious. An increase in take-home pay might be deceiving because you may actually be under withholding your federal income taxes. If your pay is being under-withheld, it could be a big shock come tax time when you owe the IRS money next April. In order to avoid a surprise tax bill for the 2018 tax year, employees should update their W-4 form. To help individuals deal with 2018 withholding issues, the IRS has recently released a new W-4 Form for 2018 and a Withholding Calculator.

Continue reading “IRS Releases New Form W-4 for 2018”