How to Protect Your Partner Even if You Choose Not to Marry

July 30th, 2012
Asset Protection, Elder Law, Estate Planning
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According to the U.S. Census Bureau the number of senior couples choosing to cohabitate instead of marry (or remarry) has risen significantly. Although this may seem like a shocking choice that goes against tradition, the truth is that there are quite a few reasons why senior couples might choose not to tie the knot:

* Tax disincentives

* Loss of military and pension benefits

* Keeping medical expenses separate

* Keeping any current debt separate

* Asset protection for the benefit of children or grandchildren

Any couples who do decide against marriage, however, will need to take extra steps to protect their partner and preserve any traditionally spousal privileges you would like your partner to have. For example, in case of accident or emergency, do you want your partner to have the same access to medical information that a spouse would have? Do you want your partner to a voice in making medical decisions if you are unable to do so?

Seniors will also want to consider the subject of real property and living arrangements. If something were to happen to you or your partner, would the surviving partner be able to remain in the home? Would he or she at least have time to find another living situation? Most people would like to think that relatives who inherit shared property will be compassionate toward the surviving partner, but this is not always the case.

Fortunately, there are ways for seniors who choose to cohabitate instead of remarry to arrange their affairs in such a way that they preserve the benefits of staying legally single, but provide their partner with traditionally spousal benefits. The best way to do this is through excellent estate planning. Our office can help seniors create a plan that will protect their rights, protect assets for their heirs, and protect the rights and well-being of their partner as well. Contact us for more information.

Affordable Care Act Likely to Improve Situations of People with Disabilities

July 23rd, 2012
Estate Planning, Health Care, News and Current Events, Special Needs Planning
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The Affordable Care Act (ACA) is a hot topic lately, and of great concern to people of all walks of life; but people with disabilities, or who rely on government benefits to help them pay for health care and living expenses, have even more at stake in the game and more reason to be concerned. It is this population of elderly or disabled individuals who, according to this recent article in Forbes, have had to (in some states) limit their income in order to continue receiving affordable health insurance through federally funded programs. But hopefully, the ACA is about to change all that.

“The most obvious and most significant health industry reform important to [elderly or disabled individuals] is the elimination of pre‐existing conditions as a bar to purchasing private health insurance. However, ACA also eliminates annual or lifetime caps, rescission of insurance policies, non‐renewability, and higher premium costs for persons with pre‐existing conditions.”

Before the passage of the ACA many disabled persons couldn’t qualify for health insurance from private insurers, leaving public programs such as Medicaid as their only option. The problem with relying on Medicaid is that once your income reaches a certain amount you no longer qualify. For disabled persons with “pre-existing conditions,” losing Medicaid benefits while still unable to qualify for private insurance was equal to disaster, and resulted in many people self-limiting their income.

Now, however, private insurance companies will no longer be able to bar individuals with pre-existing conditions. Thankfully, this should “open the door to many more people to confidently join the workforce, knowing they will not do so at the cost of having medical needs met.”

If you or a loved one has a special needs trust, or would like to know how the ACA may affect your government provided health insurance or benefits, please contact our office.

Changing Tax Law and the Presidential Campaign

July 18th, 2012
Estate Planning, Tax Planning
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Curiosity and excitement are always to be expected in an election year—especially curiosity about taxes. We all know that each presidential candidate has very different philosophies about where the tax burden lies, how much should be paid, and by whom; but all most of us really want to know is how the implementation of each philosophy might affect us personally.

CNN Money recently published an article which attempts to explain just this: each candidate’s position on various tax policies and how it might carry over to our own wallets. The entire article is very informative, but of course the section that will be of most interest to our office and our clients is what the candidates have to say about the Estate tax. Here’s the scoop:

Estate tax: Until the end of this year, estates valued at more than $5.12 million are subject to an estate tax up to a 35% top rate. Barring congressional action, the value of estates subject to the tax will fall to $1 million and be subject to a top rate of 55% next year.

Obama: Would reinstate the estate tax at 2009 levels — meaning estates worth more than $3.5 million would be subject to the tax and face a top rate of 45%.

Romney: Would repeal the estate tax but preserve the gift tax rate at 35%.”

The thing to keep in mind when reading this is that the tax cuts from a few years ago are set to expire at the end of this year. This means that no matter who gets elected, estate tax laws will be changing come January 1st. Now is the time to get your assets in order, take note of any big changes in your life (either personally or financially) and get in touch with your estate planning attorney. Everyone will want to review/update their estate plan this winter, and the earlier you start preparing the better off you’ll be.

Should Zombies Pay Estate Taxes?

July 16th, 2012
Estate Planning, News and Current Events
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How dead do you have to be before the government can tap your estate for estate taxes? Do you have to be only kind of dead, or do you have to be fully dead-dead? This is the subject of a new law review article by Adam Chodorow of the Arizona State University law school, as well as the topic under discussion in this tongue-in-cheek article in the New York Times.

When it comes to the legal rights of the undead Chodorow believes that “The important question is determining whether zombies should be considered truly deceased or partly alive. That distinction is crucial financially.” The article continues searching for answers to this and other particularly unusual questions in a hilarious but educational vein. Never has estate planning been so interesting—or trendy!—and yet readers will find themselves learning a little bit about the law in spite of themselves. Consider the following:

“But there are some tax downsides to zombiedom. When you actually die — for clarity, let’s call this ‘die-die’ — the appreciation in the value of your assets is wiped out for tax purposes. Say a vintage car you bought for $50,000 is worth $100,000 when you die-die. Under I.R.S. rules, this doesn’t cost your heirs taxes on the $50,000 gain when they sell it. Instead, the car is valued at $100,000.”

It’s the Stepped-up basis rule applied to the undead.

The article is obviously written in fun, but it brings up some legal issues that even the living would do well to think about. There have been a lot of changes to gift tax and estate tax law in the past few years, and if you haven’t created your estate plan, or if you have an estate plan but haven’t reviewed or updated it recently, you may have worse things to worry about than a zombie apocalypse. Call our office and make sure your assets and your family are protected from every kind of disaster.

Start Planning Now to Help Your Parents—And Yourself—In Retirement

July 13th, 2012
Elder Law, Retirement Planning
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This recent article in CBS MoneyWatch is calling attention to what they call “the national retirement nightmare.” The article points out that what used to be the simple plan of socking away a little bit of money from each paycheck has now turned into the huge nightmare of planning not only for your own old age, but also the elder years of your parents and possibly your spouse’s parents. The thought of such an overwhelming financial responsibility is enough to make anybody want to bury their head in the sand… unfortunately, ignoring the issue is the absolute worst thing you can do.

According to the article, “A long-term care event — either with your parents or yourself — can easily destroy anyone’s retirement plans. The cost of paying for long-term care at a nursing home for a few years — which insurance firm Genworth recently calculated at more than $80,000 per year — could pay to send a grandkid to Harvard or fund a nice retirement.”

This means that if you want to want to be able to keep your head above water during your golden years you’ll need to start planning now. The article suggests that “there are only two things we can do: (1) Take steps to reduce the odds of needing long-term care, and (2) prepare a plan for paying for the costs in case we need such care.”

Preparing a plan to pay for the costs of such care—especially if you’re planning for your parents as well as yourself—always begins with two conversations: The first conversation is with your parents about what planning they’ve done already, the second conversation is with your attorney or financial advisor to explore your options and start taking action.

As mentioned above, the idea of paying for your own golden years and for your parents can be overwhelming, but you don’t have to plan for it alone. Our firm can help you feel good about the years ahead for yourself and your loved ones.

Has Home Foreclosure Become an Elder Law Issue?

July 11th, 2012
Elder Law
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The past decade has not been good for homeowners; especially young homeowners just starting out and struggling to get by, and older homeowners who may be struggling to make the mortgage on severely depleted retirement savings. Some news sources such as CBS News are now going so far as to report that this most recent foreclosure crisis is actually affecting a disproportionate number of elderly people.

“Local governments can seize and sell a home if the owner falls behind on property taxes and fees. The process helps governments make ends meet at a time when low property values and the weak economy are squeezing tax revenue. But tax debts as small as $400 can cause people to lose their homes because of arcane laws and misinformation among consumers… The rules for property tax sales can be confusing, especially to elderly people who can’t keep track of their finances.”

Many people believe that these “arcane laws” are unfair, and that changes should be made. In fact, the National Consumer Law Center recently released a report stating that “governments should make it easier for homeowners to retake their homes after tax lien sales. It said they should limit the interest and penalties investors can charge and increase court oversight. It also called on local governments to let people pay back taxes or fees to investors on an installment plan, and to increase notice to homeowners and make sure they understand their rights.”

Increasing notice and helping homeowners—young or old—understand their rights is certainly a step in the right direction, but it may not be enough to help everyone. Recently widowed and grieving spouses, and relatives suffering from Alzheimer’s or dementia; these are just a few examples of individuals who may require extra care when it comes to protecting their finances. One of the first things to do is ensure that all their paperwork is in order—including a financial power of attorney in case of emergency. Our firm can help ensure that you or your elderly loved ones have everything they need to protect their home now, and in the years to come.

With $5 Million Gift Tax Exclusion Set to Expire, Is Now the Time for You to Give?

July 9th, 2012
Estate Planning, News and Current Events
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When legislation in 2010 raised the lifetime gift tax exclusion amount from $1 million to $5 million many wealthy families rejoiced, expecting that they would now be able to give large gifts to children or grandchildren and be able to save millions in taxes at the same time. But for all the rejoicing, the unsteady economy has made many people cautious, and has parents and grandparents thinking twice before giving away wealth that they may need themselves in later years.

According to this article in Bloomberg Business Week, however, the time has come for families to take a careful look at their finances and decide if they want to take advantage of the $5 Million gift tax exclusion before it expires. “Legislation enacted in 2010, which raised the lifetime gift-tax exclusion to $5 million from $1 million for each person starting last year, is set to expire. For 2012, the inflation- adjusted figure is $5.12 million for each person. It will drop to $1 million on Jan. 1 unless Congress acts.”

Parents who want to take advantage of the gift tax exclusion, but who worry that their children may not yet be ready to handle such a large financial gift, do have options. As the article points out, “Many [families] are setting up irrevocable trusts for children or grandchildren and transferring assets such as second homes that have the potential to appreciate.” This not only allows the assets to appreciate, but also allows parents and grandparents to breathe easy while young children or grandchildren have time to mature before receiving a gift or inheritance.

If you think your family may benefit from taking advantage of the gift tax exclusion before the end of the year, please contact our office. We can help you explore your options and learn more about what legal changes may be in store in the coming year.

States are Looking at The Big Picture When It Comes to Taxes

July 6th, 2012
Estate Planning, Tax Planning
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In addition to a federal estate tax, most people can plan to pay an estate tax for their state of residence as well upon the distribution of a deceased loved one’s estate. These gift and estate taxes generate a significant amount of revenue for most states; but according to this recent article in Forbes, some states are finding that in spite of the revenue it generates, gift and estate taxes have actually become a financial liability. In fact, the state of Tennessee recently enacted legislation which would phase out their estate tax over the course of four years.

The reason for this is simple; studies have shown that “Tennessee’s gift and estate tax is the single greatest reason why wealthy people don’t want to live in Tennessee. Many leave the state and few move into Tennessee. They take all their jobs, entrepreneurship, spending, homes and wealth with them. This is the single greatest detriment to Tennessee’s growth and Tennessee’s ability to raise sufficient tax revenues.”

Tennessee isn’t the only state making these kinds of legislative changes; another Forbes article reveals that “Ohio legislators in both the House and the Senate have voted to repeal the state estate tax as of Jan. 1, 2013.” News sources are actually rife with evidence that many other states have either already enacted legislation repealing estate taxes, or are considering a repeal of what many residents now consider an unfriendly tax.

If you’re wondering just how tax friendly or unfriendly your own state is, you can find an interactive state-by-state map on the Forbes website here. Or an even better way to learn more about your options regarding gift and estate tax strategies is to contact our office today.

Do You Know How Much Your 401(k) Is REALLY Costing You?

July 2nd, 2012
Asset Protection, News and Current Events, Retirement Planning
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Do you know how much your 401(k) is costing you? Are you sure? What most people don’t know is that many employees with “free” retirement plans through an employer actually pay a number of hidden fees. According to a recent article in the Huffington Post, “71 percent of plan participants don’t think they pay any fees for their company’s retirement plan. In reality, they pay a variety of fees including investment management, administrative and advisory fees, and more — investment management fees usually comprising the bulk of the expenses.”

All of this is about to change, however, thanks to new laws being enacted by the Department of Labor. CNN Money reports that “A new federal rule took effect July 1 that requires 401(k) plan providers to disclose certain 401(k) fees, and employers to distribute these disclosures to plan participants by Aug. 30.” The hope with this new disclosure rule is that it will increase transparency, and help both employees and employers stay aware of how much their “free” 401(k) may or may not be costing them in administrative fees.

We live in a culture of constant demands and distractions, and it is all too easy to fill out the paperwork to set up a 401(k) with an employer and then forget about it, assuming that as long as nothing changes, everything will keep working the way it’s supposed too. Things do change, however, both in the world of investment and in our own lives. All too often we see clients who miscalculate their 401(k) growth in relation to their retirement needs, or whose valuable retirement savings is lost to taxes when the owner passes away unexpectedly. In all cases, it is important not only to be aware of what’s happening to your savings, but also to be proactive about protecting it, and this is where our office can help.

Whether you are already retired or just getting started with your savings, our firm can help you evaluate your assets, plan for their growth and upkeep, and ensure that they end up in the right hands if something should happen to you. The temptation to procrastinate or bury your head in the sand can be strong, but the knowledge of the consequences of inaction can be stronger. Contact our office and let us help you protect your retirement savings for yourself and your loved ones.

Facebook Founders Use GRATs to Avoid Excessive Taxation; You Can Too

May 16th, 2012
Asset Protection, Estate Planning, News and Current Events
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News sources recently revealed that Facebook founder Mark Zuckerberg—as well as other Facebook top brass—use Grantor Retained Annuity Trusts to protect their assets and investments from excessive taxation. Grantor Retained Annuity Trusts (more commonly called GRATs) are a perfectly legal—and very efficient—way to protect and pass significant assets from one person to another without incurring an exorbitantly high tax bill.

According to the article cited above, “GRATs offer a perfect vehicle for wealthy investors who put money in start-ups, while other trusts don’t.” But we don’t recommend GRATs only to wealthy startup investors. GRATs are “an excellent way to shift wealth to others at little or no tax cost and with minimal legal and economic risk.” As such, they can be the perfect tool for business owners, professional investors, and many others.

Setting up a GRAT allows the investor/grantor to give assets over to the trust for a pre-determined number of years. During this time the assets appreciate and the grantor receives “annual payments adding up to the asset’s original value plus a return based on a fixed interest rate determined by the Internal Revenue Service.” At the end of the trust term the assets (at their new value) are transferred to the beneficiary named in the trust with none of the usual gift or estate tax on the appreciation.

This makes GRATs sound like the perfect (and perfectly simple) tool, but nothing is perfectly simple. The pre-determined lifetime of your GRAT will depend on your individual circumstances, as well as the tax laws at the time, so you’ll want to make sure you have the help of an experienced and knowledgeable attorney helping you design your trust. Contact our office for more information.