While folks who put an estate plan into place years, or even decades, ago are to be commended for planning ahead, they should not assume that the job is completed. Estate plans should be reviewed and updated on a regular basis - I suggest every two years or so.
This article by Lewis Schiff in Investment Advisor magazine provides a good discussion of why it is essential for older plans to be reviewed.
This is the Press Release issued by the FDIC (emphasis added):
The FDIC's Board of Directors today adopted changes to simplify the rules for determining the coverage available on revocable trust accounts – commonly called payable-on-death accounts or living trust accounts. The interim rules, which are effective immediately, eliminate the concept of qualifying beneficiaries, so that coverage is based on the naming of virtually any beneficiary.
Under the revised rules, coverage for the vast majority of account owners generally is based on the number of beneficiaries named in a depositor's revocable trust account(s). The insurance limit will still be based on $100,000 per named beneficiary. For revocable trust account owners with more than $500,000 in such accounts naming more than five beneficiaries, the coverage is the greater of either $500,000 or the sum of all the named beneficiaries' proportional interest in the trusts, limited to $100,000 per different beneficiary.
"We believe the interim rule will not only result in faster deposit insurance determinations after bank closings, but will help improve public confidence in the banking system," said FDIC Chairman Sheila C. Bair. "We strongly encourage owners of revocable trust accounts to make certain that the names of their beneficiaries are included in the bank's records."
The new rules are effective as of today and apply to all existing and future revocable trust accounts at FDIC-insured institutions.
Comments on the interim rule are due no later than 60 days after the interim rule is published in the Federal Register. Publication is expected to occur within a week.
Do you have an Estate Plan in place? If so, are you confident that it fully covers matters relating to health care, family, taxes, and asset protection?
It is important to understand the impact of a comprehensive estate plan and how it will protect you and your family should an untimely death or disability occur, or in the event of a catastrophic lawsuit against you. Below are some questions that will help you to think about specific issues important to you and your family.
This article is from one of our recent newsletters. Although it refers only to executors, most of the considerations also apply to trustees. North Carolina no longer requires that an executor be a resident of the state.
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Continue Reading...A recent article in the Baltimore Sun discusses the special planning that should be done by parents of children with disabilities. I think the article is good, although it it states that one should contact a lawyer OR financial planner who is an expert in the area. While enlisting the advice of a knowledgeable financial planner might not be a bad idea, it is an absolute must to have an expert attorney involved as well. Financial planners cannot prepare wills or trust documents.
North Carolina also has at least one non-profit organization that offers "pooled" trusts - Life Plan Trust.
The North Carolina Department of Revenue has published a list of recent changes to NC tax laws.
I previously reported on relatively minor change to the estate tax and the repeal of the gift tax. Another change that might be of interest to readers in the reduction in the top income tax rate from 8.25% to 8% for 2007 and 7.75% for 2008 and beyond.
Elder Law is becoming a burgeoning practice area as the Baby Boomer Generation is rapidly beginning to gray out. This group has arguably accumulated more wealth as a group than any prior generation and has paid more taxes to support entitlement programs than any have previously. Not surprisingly, its members are trying to retain as much of this wealth as possible and pass it on to the next generation while lawfully maximizing their rights to participate in governmental entitlement programs. The Federal Government’s attempts to cut costs by restricting these entitlements has given rise to a concentrated effort among Elder Law practitioners to develop mechanisms to legally retain assets within the family while qualifying for benefits.
Continue Reading...
Planning for long-term care expenses should be a part of everyone's estate plan by the time they reach 50. Here's a piece by Alex Townsend, CLTC of Raleigh on why it may not be a good idea to try self-insure:
Things To Consider:
“How much does someone have to be worth to not need long-term care insurance?”
What’s the magic number? How rich is too rich to not need LTC insurance protection? Even though I think that is the wrong question to ask (see next question), my answer is this: If you can write a check each month, indefinitely, for the kind of long-term care that you and your spouse will desire should you have the need, and it doesn’t bother you to write this check, then you may want to pass on LTC insurance.
“I want a number. Exactly how much does someone have to have to not need LTC insurance?”
My answer is a question. How much does someone have to be worth to not need Major Medical or Medicare Supplement or homeowners insurance? The reason I ask these questions is that we don’t think of other types of insurance in terms of whether we have enough money to not need them. Think about it: There are many wealthy people who could afford to rebuild their home if it burned to the ground, and the likelihood of that kind of total loss is minimal. You may want to take this opportunity to review all your insurance with a critical eye applying sound risk management principles. Perhaps LTC coverage is not the only potentially catastrophic cost you should consider
self-insuring. Assuming that you believe in the value of insurance and you insure for other large risks, why is long-term care insurance the one insurance that you won’t buy? Financially astute people don’t make the best decisions every time, but they also don’t make big mistakes. Most wealthy people don’t like their money to be vulnerable. If you buy LTC insurance and never use it, you might say you’ve made a small mistake. If you don’t buy LTC insurance and need it, you might say it was a big mistake.
Other Considerations:
Often, after purchasing a policy, I have had many people tell me that they felt a tremendous sense of freedom, relief, and peace of mind saying things like, “now I can enjoy my money because I have so much more confidence knowing I have a resource in place in case the unthinkable happens”.
Plan...then relax!
Black Enterprise magazine has named Durham as the best place to retire. Factors considered were quality on life, health care, taxes, leisure, arts and culture, and climate. Asheville ranked 11th.
Good news for me - my office is less than a mile from the Durham City limits.
Nursing homes are being accused by some patient advocates and state long-term care ombudsmen of increasingly evicting patients who are too inconvenient or too costly to care for. And the most vulnerable appear to be those patients with dementia or highly vocal families who are on Medicaid, according to a recent Wall Street Journal report.
The federal government permits nursing homes to evict patients for specific reasons, such as endangering the health or safety of others and needing care only available elsewhere.
The facilities claim they play by the rules and follow federal guidelines, but an increasing numbers of formal complaints about nursing home discharge practices suggest otherwise.
The U.S. Administration on Aging has seen complaints double from 1996 to 2006. And this doesn’t take into account informal complaints or unreported incidents.
The reason for the increase in nursing home evictions – also referred to as involuntary discharges – appears to be financial. Evicted Medicaid patients are replaced by patients coming out of the hospital who pay a higher daily rate for short-term care and rely on Medicare or private insurance to pick up the tab.
This new focus on short-term recovery and rehabilitation makes good financial sense for facilities. One nursing home chain claims it averages $411 a day from Medicare patients but just $166 from those on Medicaid. As an industry, nursing homes report Medicaid reimbursements are $4.4 billion short of the actual cost of care.
Of course it’s the patients who suffer the most. Elderly and frail, they are transferred to other nursing home facilities, hospitals or psychiatric facilities, where they find it difficult to thrive in a totally new environment. The “transfer trauma” they experience results in mental health problems, weight loss, and frequent falls that can lead to death within months of a change in venue.
In comparison with nursing home patients, assisted living residents have even less protection. Management in assisted living centers can evict residents without reason or appeal process just by giving them one or two month’s notice. Here, too, the U.S. Administration on Aging has seen discharge practice complaints soar over the last decade. Accusations are growing that Medicaid patients are being targeted for eviction and two states are pursuing assisted-living companies on these charges.
Source: To be Old, Frail and Evicted: Patients at Risk. Wall Street Journal, 7 August.
Rep. Charles Rangel, chair of the Ways and Means Committee in the U.S. House of Representatives, owes the IRS $5,000 in back taxes for failing to report years worth income from a rental property. Ironically, his position means that he is one of Washington's most powerful influences on changes to the tax code.
Rangel himself admits that there is no excuse for his failure to report the income, but does not believe that he should step down. I beg to differ. I believe that he should resign immediately. A tax cheater in charge of changes to the tax laws? Makes no sense to me.
I sometimes say that I specialize in Peace of Mind. So, when I saw this post in the zenhabits blog
I thought it would be a good addition to my blog. This piece was written by Andrew Flusche, a fellow lawyer and blogger.
Legal issues don’t have to be stressful. In fact, you can use the law to reduce your risk, eliminate uncertainty, and plan for the unthinkable. The law can help with your overall peace of mind.
1. Execute a will
Estate planning isn’t just for wealthy old people. If you’re an adult, you need an estate plan. This spells out what happens to your property when you die. While the law provides default rules for people who don’t specify their intentions, you might be surprised by what those rules say.
For the average person, an estate plan is simply a will (or “last will and testament”). This document spells out who gets what from your estate. Your handwritten will can be valid, but it’s safest to have a lawyer draft your will and walk you through the formal execution ceremony. If you have a spouse or children, you really need a will to ensure they are properly taken care of.
2. Designate your health care wishes
How should medical decisions be made for you in the event of an accident? Without the appropriate legal papers, your next of kin will attempt to make the decisions that you would want. But does he or she know all your wishes?
You should protect your health care decisions by at least appointing a health care power of attorney. This designates the person who will make your decisions. They are bound to make the decisions that you want, not what they think is best.
To go the extra mile, you can execute a living will. This document attempts to set forth your wishes for different medical scenarios. Then your health care agent will be bound to act according to this document. If you neglect both of these health care documents, your life might be in the hands of someone you don’t trust.
3. Select the correct beneficiaries
Do you have a life insurance policy or retirement plan? Who are your beneficiaries? If your estate is listed as the beneficiary, your heirs could be in for a surprise when you pass away.
Life insurance and retirement plans automatically pay the designated beneficiary when the policy holder dies. To make sure your family or other heirs get this money, you should designate them by name as the beneficiaries. If your estate gets paid directly, the true beneficiaries will be in for a long wait before they can be paid anything. And your creditors might claim the money before anyone else can be paid. Those beneficiary blanks are critical.
4. Get insurance, even if you rent
Property insurance isn’t just for homeowners. Even if you rent, you need insurance protection. Homeowner’s or renter’s insurance primarily covers against loss to your property due to damage or theft. But it can also be important if you’re ever sued.
When guests come onto your property, you legally take on a certain amount of liability for their safety. If a guest is injured while on your property, you could be held responsible. Fortunately, the typical property insurance policy provides some protection for you. Guest medical coverage will pay for your guest’s medical bills. For the cost of a renter’s insurance policy (at most $15/month), you can’t afford to neglect this coverage.
5. Separate your business
If you run your own business, you should consider a limited liability business entity. Running a sole proprietorship is simple, but it exposes you and your family to certain risks. Creditors and people you have possibly wronged can come after you personally. Your business could be putting the family home at risk.
To solve this problem, you can easily setup a basic corporation or a limited liability company (LLC). Then when you sign contracts and incur business debts, you are only putting the business on the line. It’s important to run the business properly to maintain your liability shield. But without the formal business entity, you have no hope of limiting your personal liability.
This is a complicated but potentially very worthwhile strategies to pursue in estate in which the decedent owned valuable depreciable real estate (e.g. office buildings, shopping centers, or multiple rental homes). Thanks to Bob Keebler, CPA for the following memo:
A unique opportunity many lawyers, CPAs and trustees miss during the estate administration process is to recommend cost segregation studies. Such studies may be applied on both a going forward basis and for the open income tax years prior to an individual’s death. A cost segregation study simply allows the owner of real property to reclassify segments of what would otherwise have been treated as 27.5 and 39 year life depreciable property as 5, 7, or 15 year property.
Continue Reading...The following is from the latest GiftLaw eNewsletter's Washington Hotline:
Presidential Candidate Barack Obama's Proposals
Middle Class Tax Cuts - The general goal of the Obama plan is to cut taxes for the middle class and raise taxes for higher-income persons. For individuals age 65 and over with incomes under $50,000, he proposes no income taxes.
Tax Rates - The personal tax rates for persons with $250,000 or more of income would be restored to the 1995 level of 39.6%. The corporate tax rate would remain at 35%.
Estate Tax Rate - The estate tax rate of 45% would be continued with the 2009 exemption of $3.5 million per person.
Capital Gains Tax - The probable capital gains tax rate will be 20% (various rates have been discussed).
Net Tax Cut - The overall plan is a net tax cut. The increased taxes on higher income persons will be offset by tax credits for lower income workers, increased college tax credits and increased childcare tax credits.
Sen. Obama stated, "I will cut taxes - cut taxes - for 95% of all working families. Because in an economy like this, the last thing we should do is raise taxes on the middle-class."
Presidential Candidate John McCain's Proposals
Tax Cuts - Sen. McCain proposes to continue the tax cuts of 2001 and 2003. The top rate will remain 35% for higher-income persons.
Increase Dependent Deduction - The dependent deduction would increase from the current $3,500 per child level to $7,000 by 2016.
Corporate Rate - The top tax rate on corporations would be reduced to 25%, with a broadening of the corporate tax base.
Alternative Minimum Tax - The AMT patch would be continued and indexed to exclude most Americans from AMT.
Estate Tax - The estate tax exemption would be increased to $5 million per person with a top estate tax rate of 15%.
McCain advisor Carly Fiorini has indicated, "John McCain has a consistent record of cutting taxes. As President, he will fight efforts to increase the current tax rates, and will require a 3/5 majority vote in Congress to raise future taxes."
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