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

A new online service, Entrustet, provides a free way to safeguard your digital assets, such as domain names, blogs, twitter accounts, online financial accounts, etc.  I have tried it out, and it's very user friendly. 

• With a Lawyer Directory on the site, Entrustet makes it easy to find local estate planners who know what to do with digital assets
• Entrustet makes it easy to share your digital assets with your lawyer. In the Account Guardian, there's a place to add your attorney's contact information. In the Account Guardian dashboard, there's an "email" icon at the bottom where you can send a summary of your digital assets directly to your attorney.

In addition to the general public, estate planning lawyers may find it a good value-added service to introduce to clients.  Some features that benefit lawyers:

• A listing on the Entrustet directory comes with educational information and support for incorporating digital assets into clients' estate planning documents. There is a digital assets how-to guide and example copies of real life wills with digital assets is included. I understand that an intake sheet that lawyers can add to their existing intake forms to introduce clients to the topic of digital estate planning.
•  A listing on the directory comes with a site seal to put on the firm's website to let visitors know that the firm is certified in digital assets.

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My former colleague and attorney Julie Garber recently sent the following email to over 50 attorneys, trust officers and accountants located throughout the U.S.:

"Hi, I am conducting a straw poll on the estate tax for my blog. The question is what do you think Congress is going to do with the estate tax in 2010 and here are the choices for answers:

A. Nothing, tax will come back on Jan. 1, 2011 with $1 million exemption, 55% tax rate

B. Reinstate tax at 2009 levels ($3.5 million exemption, 45% rate) and make it retroactive to Jan. 1, 2010

C. Reinstate tax at 2009 levels ($3.5 million exemption, 45% rate) and not make it retroactive to Jan. 1, 2010

D. Reinstate tax at 2009 levels ($3.5 million exemption, 45% rate) and give heirs of decedents who die in 2010 but prior to enactment of the new law the choice between using the modified carryover basis and the new law

E. Something else - please describe"

The results of the poll:

• 68% chose A
• 11% chose B
• 7% chose C
• 7% chose D
• 7% chose E

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Here's the text of the press release from the Federal Deposit Insurance Corporation:

Note:  for the rules that apply trust owned bank accounts (and other types of ownership, click here.

On July 21, 2010, President Barack Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act, which, in part, permanently raises the current standard maximum deposit insurance amount to $250,000. The standard maximum insurance amount of $100,000 had been temporarily raised to $250,000 until December 31, 2013. The FDIC insurance coverage limit applies per depositor, per insured depository institution for each account ownership category.
The temporary increase from $100,000 to $250,000 was effective from October 3, 2008, through December 31, 2010. On May 20, 2009, the temporary increase was extended through December 31, 2013.
 

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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

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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.

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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.

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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.

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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.)

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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.

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