North Carolina Estate Planning Blog : North Carolina Estate Planning Lawyer & Attorney : Trust Counsel, PA : Trust Administration : Serving Chapel Hill, Durham, Raleigh, Pittsboro, Orange County, Chatham County

The North Carolina Medicaid program paid a total of $52,575.14 in nursing home costs for Sallie Anthony. After Mrs. Anthony's death, Anna Thompkins, who would become the Executrix of Anthony's estate, contacted the State to inquire about its claim for the Medicaid expenditures. She then completed the probate of the Estate without paying the State. Some time later, the State filed suit against Thompkins, who defended herself by alleging that the statute of limitations had expired. The Court ruled for the State because the statute of limitations did not expressly apply to the State and, in the absence of express inclusion in the statute, the doctrine of nullum tempus occurritt regi (no time runs against the king) applies in North Carolina.

North Carolina Department of Health and Human Services v. Thompkins, 2010 N.C. App. LEXIS 1153 (July 6, 2010)

Source: July 13, 2010 NAELA eBulletin

• Email This
• Print
• Comments
• Trackbacks

Yesterday I listened in on a conference call about planning to avoid the 3.8% Medicare Surtax that will come into effect in 2013.  The speaker, CPA Robert Keebler, a nationally known tax expert, stated that it is likely that Congress will offer estates of those who die in 2010 the choice between the estate tax system, with a step-up in basis for appreciated property, and the modified carryover basis system currently in effect.  The latter system will be most advantageous for virtually all estates except those under $1 million.  Click "Continue Reading" for a brief explanation of the modified carryover basis rule.

Keebler and Jonathan Mintz, an Executive Director of WealthCounsel, LLC both agree that Congress will not provide for an increase of the estate tax exemption over the $1 million that is scheduled for next year.

• Email This
• Print
• Comments
• Trackbacks

Watch out for your heirs, who might not want you to live to 2011 due to the heavy estate tax burden estates over $1 million will face next year.  See this article from the Wall Street Journal.

• Email This
• Print
• Comments
• Trackbacks

A New Social Security Program Operations Manual System (“POMS”) Section Regarding Early Trust Termination Provisions for "Self-Settled" Special Needs and Pooled Trusts is set forth below.  This will not affect SNTs established with the assets of a third party, such as a parent.

Provided by Sharon Kovacs Gruer, CELA and Richard A. Courtney, CELA

SI 01120.199:
A. Introduction to early termination provisions and Trusts
1. Effective date of instructions regarding early termination provisions and trusts. These instructions are effective 10/1/10 and are to be considered informational until that date. Do not apply the policy or procedures in this section prior to 10/1/10.

2. Applicability of early termination provisions and trusts
This section provides the policy for evaluating special needs and pooled trusts established with the assets of an individual on or after 1/01/00 and that contain early termination provisions. If certain criteria are met, such trusts can be excepted from counting as a resource under Section 1613(e)(5) of the Social Security Act (the Act). If those criteria are not met, such trusts should instead be evaluated under Section 1613(e) of the Act.  [emphasis added.] For more information about evaluating trusts under Section 1613(e) of the Act, see SI 01120.201 <https://secure.ssa.gov/apps10/poms.nsf/lnx/0501120201> .

Use the instructions in this section to evaluate the following types of trusts:
· Special needs trust established under Section 1917(d)(4)(A) of the Act
For information on special needs trusts established under Section 1917(d)(4)(A) of the Act, see SI 01120.203 <https://secure.ssa.gov/apps10/poms.nsf/lnx/0501120203> .

· Pooled trusts established under Section 1917(d)(4)(C) of the Act
For information on pooled trusts established under Section 1917(d)(4)(C) of the Act, see SI 01120.203 <https://secure.ssa.gov/apps10/poms.nsf/lnx/0501120203> .

3. Case processing alert regarding early termination provisions and trusts
Trusts are often complex legal arrangements involving State law and legal principles that require obtaining legal counsel. Therefore, the following instructions may only be sufficient to recognize that an issue is present that should be referred to the regional office (RO) for possible referral to the Regional Chief Counsel. When in doubt, discuss the issue with the RO staff. Many issues can be resolved by phone.

B. What is an early termination provision?
An early termination provision or clause would allow a trust to terminate before the death of the beneficiary. Commonly, such provisions or clauses provide for termination of the trust when, for example, the beneficiary is no longer disabled or otherwise becomes ineligible for Supplemental Security Income (SSI) and Medicaid, or when the trust fund no longer contains enough assets to justify its continued administration.

• Email This
• Print
• Comments
• Trackbacks

You or someone you love may be ready for a retirement community living arrangement, which typically includes lifetime residential accommodations, meals, and some degree of medical services. These facilities can be quite expensive. The good news: Unexpected tax write-offs may help offset the cost.

The tax-saving idea is that you may be able to deduct part of the retirement community's one-time entrance fee and ongoing monthly fees as medical expenses on your Form 1040, regardless of your current health status. Since the fees we are talking about here can be quite large (see right-hand box), meaningful deductions may be possible despite the limitation on medical write-offs. (You can only deduct medical expenses to the extent they exceed 7.5 percent of your adjusted gross income.)

Court Decision Shows the Way

For recent proof that substantial deductions are possible, we can point to a 2004 Tax Court decision. Source: Delbert L. Baker v. Commissioner (122 TC 143 (2004). In 1989, Delbert Baker and his wife bought into a resort-style retirement community. It provided four living arrangement categories:

• Independent living with minimal medical services,
• Assisted living with more medical help,
• Special care (for victims of Alzheimer's and dementia), and
• Skilled nursing with maximum medical services.

The Bakers paid a one-time entrance fee of about $130,000 plus monthly fees of over $2,000 in exchange for lifetime residential and medical care privileges for both spouses. (This was back in 1989. Today's prices would be much higher in many areas.)

• Email This
• Print
• Comments
• Trackbacks

Effective July 1, 2010, the fee for opening a probate proceeding in North Carolina increased by $1.00 to $89.00.  While one dollar is not much of an increase, it is representative of the trend over the last few years to raise court costs.  It will only get worse, making living trusts to avoid probate that much more attractive.

• Email This
• Print
• Comments
• Trackbacks

In last week's Olmstead v. FTC decision, the Florida Supreme Court ruled that single member limited liability companies (LLCs ) do not provide protection from "outside" creditors. This has been a concern of mine since a similar bankruptcy court ruling in Colorado in 2003, and I have advised clients that North Carolina LLCs could face similar attack.

LLCs are great entities for providing asset protection for their owners against "inside" creditors, such as a tenant injured on real property owned by the LLC.  Multi-member LLCs also protect a member's interest from outside creditors such the holders of unrelated judgments.  This Facebook post from Florida attorney Ed Arista offers a nice synopsis of LLCs and asset protection.

• Email This
• Print
• Comments (1)
• Trackbacks

Friday's Wall Street Journal had an article on the latest estate tax proposal, from independent  Senator Bernie Sanders and Democratic Senators Tom Harkin of Iowa, Sheldon Whitehouse of Rhode Island and Sherrod Brown of Ohio.

The proposal would retroactively reinstate a $3.5 million exemption with a tax rate of 45%. Estates valued between $10 million and $50 million would pay a 50% rate, estates valued above $50 million would pay 55%, and estates in excess of $500 million would be hit with an additional 10% surtax.  The proposal includes a 10-year minimum on grantor retained annuity trusts (GRATs), which would greatly reduce the usefulness of these trusts as estate tax reduction strategies .

Don't look for the proposal to become law anytime soon, however.  Many estate tax measures have stalled in this Congress and I don't think things will change in the near future.

• Email This
• Print
• Comments
• Trackbacks

Most people who execute living wills, health care powers of attorney and other advance directives express their desire to not have their lives prolonged if terminally ill or in a persistent vegetative state. 

However, there are some who believe that all or many measures should be taken to prolong their lives.  The North Carolina statutory documents are not really designed for this purpose.  Thanks to a client, I recently discovered the "Will to Live" Durable Power of Attorney, which is designed for persons who want to be kept alive by artificial nutrition hydration and nutrition, as well as other life-prolonging measures under most circumstances.

This document does meet the NC statutory requirements.  Just as with the standard living will, I would encourage those who are interested in using it to discuss it with both their physician and their estate planning attorney.

• Email This
• Print
• Comments
• Trackbacks